Tax Grab or Good For Business?
by Linda Lujan
There's a firestorm of controversy brewing to the north. Big tax changes are coming for British Columbia and Ontario, this summer, and citizens in those provinces are not happy. We'll get into the details in a bit, but first let's talk about the controversy.
According to this article, a stunning 90% of citizens are against this change saying it's a tax grab. But this article and this article say it's really revenue neutral, but points out that more things will be taxable now than before.
In our view, it appears that the new system will help businesses, because it avoids the cascading effect of the provincial sales taxes which tax inputs depending on how many times products change hands. It's revenue neutral in the sense that the overall tax rate stays the same. It's not revenue neutral in the sense that while it helps business by not taxing their inputs it makes things taxable for consumers that weren't taxable before. Have a look at the linked articles for more details.
Now here's the details:
If you are registered in either one of the provinces, be prepared for the changes that will take affect on July 1, 2010. Both British Columbia and Ontario will be changing over to an Harmonized Sales Tax (HST). At which point, the Canada Revenue Agency (CRA) will administer the HST in both Ontario and British Columbia.
Ontario released information Notice No. 3 on October 14, 2009 that gives the general transitional rules for changing over to HST starting July 1, 2010. Click this link to read Ontario’s HST Notice No. 3. HST Notice No 3. British Columbia has also released a Tax Information Notice; HST Notice #1 dated October 14, 2009, which explains the general transitional rules as well. Click this link to read British Columbia’s HST Notice #1 BC HST Notice #1.
The Canada Revenue Agency released a GST/HST Notice No. 247 in October 2009, which provides questions and answers concerning the change taking affect in both provinces. This notice does a great job in describing how the change will affect tangible personal property such as sales, leases, licenses, returns and exchanges, as well as direct sellers. It explains services such as freight and passenger transportation as well as intangible personal property. This notice goes into the changes as it applies to accounting and claiming Input Tax Credits. Here is a link to the GST/HST notice for your convenience. Click this link to connect to the notice: GST/HST Notice.
In Ontario and B.C., the 5% goods and services tax (GST) will continue to apply according to the usual rules, either as GST or, where the HST would apply, as the federal part of the HST. The new HST rate in Ontario will be 13%, consisting of the 5% federal and an 8% Ontario. In British Columbia, the HST rate will be 12%, consisting of the 5% federal part and a 7% British Columbia.
Sales of Tangible Personal Property:
In general, the HST would apply to any sale that has become due, or is paid before coming due, prior to May 1, 2010 for a sale of tangible personal property that is delivered and ownership transferred to the recipient on or after July 1, 2010.
The HST would not apply to a sale of tangible personal property if the property is delivered or ownership is transferred prior to the July 1, 2010 change date no matter when the amount becomes due or is paid prior to becoming due.
That's Just The Beginning, It's a Jungle Out There.
It's not good tax code unless a forest acre of trees is used to print it. You can bravely hack through the dense pages yourself, but it's more efficient to talk to someone who's already explored the landscape and can give you map. There no cost to talk to us on the phone regarding your situation ("get a map"). We know the pitfalls and speak the language.