As many of you know, and those who live under a rock may not know, Ontario is converting over to HST come July 1st 2010. For my non-Canadian readers, this is VAT, we just stupidly call it “Harmonized Sales Tax” cos it harmonizes the provincial sales tax with the federal goods & services tax (which is a VAT).
In the wacky world of VAT we have these things called ITCs (Input Tax Credits) — basically, you can claim back the VAT you paid so long as the purchases pertain to the continuing operations of the business. As an example, your stationary supplier charges you $5 in GST. You can apply that claim to the GST you charged your own clients, say about $80. So in essence you remit $75 to CRA (Canada Revenue Agency).
With Ontario Sales Tax, unless one was a manufacturer, the PST would be imbedded into a cost and could not be claimed back against the PST charged to clients. Though there are exceptions such as being eligible to use a G-permit or issuing a temporary PST Exemption Form for the sole purpose of not paying PST on something which will be sold on to a client (in essence you become a middle man).
So far the legislation for Ontario HST has not been completed, so it is a tad difficult to determine how to approach it. Today’s seminar was losely based on how Quebec instituted their own VAT (which they call QST) back in 1992, and how the Atlantic Provinces did theirs in 1997.
What we do know is that these will be zero-rated (meaning no provincial portion of the HST, which btw is 8%):
- books (provincial definition)
- kids’ car seats
- kids’ booster seats
- children’s clothing & footwear
- feminine hygiene products
- newspapers (provincial definition)
- meals under $4 — so yes, your Timmies double-double will be free of the dreaded 8% additional tax
The provincial portion of the HST will be applicable to certain insurance premiums, motor fuels and residential energy (hydro, natural gas, oil etc). Telecommunications will also be subject to the provincial portion of HST, except for internet access and toll-free numbers … again following the province’s strict definition of internet access). If you lease a vehicle, can’t claim back (if you are a business) the provincial portion of HST, so yeah, it will be 13% now for car leases.
Happy HST everyone!
btw British Columbia is also converting. The only provincial holdouts are Alberta (yes, they do have PST, but it’s very low and applied to only certain items), Saskachewan, Manitoba and PEI.