Brian Bonney of the Canadian Federation of Independent Business (CFIB) and Janet Kasun from the Ottawa office of Borden Ladner Gervais LLP (BLG) answered a selection of your questions about the harmonized sales tax (HST) that will be introduced in B.C. and Ontario on July 1.
Question from 'IdRatherBeCanoeing:' As a very small business, I did not collect GST but did collect PST. Do I have to collect HST?
Janet Kasun, a lawyer practicing in the Ottawa office of Borden Ladner Gervais LLP (BLG): No, you don’t. To understand the HST, it is simplest to just think of it as GST at a higher rate (13 per cent in Ontario) and forget everything you know about PST. Small businesses, generally those with less than $30,000 in annual revenues, are not required to register for and collect the GST. The same rule will apply to the HST. For very small businesses, this means one less set of forms to be completed and one less auditor that may come to visit. However, a small business may choose to register voluntarily for the GST/HST, collect the tax from its customers and recover the tax paid to its suppliers by way of input tax credit. Businesses that expect to grow quickly generally prefer to register early not only to be able to recover the GST/HST paid on their expenses but also to avoid having to closely monitor their sales to ensure they register as soon as they are required to do so. Now that the rate has increased, more small businesses may decide to voluntarily register.
Question from 'Howdja:' I own a second-hand book store and at present charge only GST. I have phoned the government and nobody seems to have a clear idea what the tax should be on used goods. Can you help, please?
Brian Bonney, the CFIB's director of provincial affairs for B.C., answers for B.C.: It should remain as it currently stands, meaning only the 5 per cent federal portion should apply. Our understanding is that used books are not distinguished from new when it comes to taxation. The 7 per cent portion of the HST after July 1 will be eligible for a point-of-sale rebate, meaning that the customer only pays 5 per cent tax.
Mr. Bonney's answer for Ontario: The government of Ontario has announced it will provide a point-of-sale rebate of the provincial portion of the HST payable on qualifying books. For more information and for the list of books that qualify for the rebate, go here.
Question from 'Ardouin:' I am a self-employed supplier of business services to the federal government. I reside in Ontario. Most of the departments for which I work are based in Ontario but some are based in Quebec. I am registered for the GST and currently charge it to all my clients. I would like to know the following: After June 30, do I need to charge HST to my federal government clients based in Ontario? After June 30, do I need to charge HST to my federal government clients based in Quebec? I have been reporting GST quarterly using the Quick Method to calculate the amount of tax I must remit. Can I continue to use this method, and what are the percentage rates I must apply?
Janet Kasun: When you are providing services to clients in more than one province, you will need to use the “place of supply” rules to determine the appropriate rate of tax. Generally, the appropriate rate applies to the province in which the client is located. If the client has more than one location, you choose the location that is most closely connected to your supply, generally the office that initially engaged you. Assuming your services are of an advisory nature and do not involve real or tangible personal property, the general rules will likely apply.
The GST/HST applies to the federal government, so where you are providing services to federal government departments located in Ontario, you will charge the 13 per cent harmonized rate. For those clients located in Quebec, you will only charge the federal 5 per cent rate of tax. Quebec has not harmonized its provincial sales tax (QST) with the federal GST. As the federal government does not pay the QST, you do not need to worry about whether or not that tax applies in your circumstances. Other businesses should be aware that the rules for the QST are also changing and many who may not have collected the QST in the past may find they are now required to do so.
More on the HST