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Shoppers carry their bags through the Eaton Centre in Toronto, May 30, 2010. (J.P. MOCZULSKI)
Shoppers carry their bags through the Eaton Centre in Toronto, May 30, 2010. (J.P. MOCZULSKI)

Ask The Experts

HST business questions from readers answered Add to ...

Mr. Bonney's answer for BC: Yes, the cost of the hardwood flooring would be the same before and after July 1. Before July 1, the product itself was subject to both GST and PST, and the service of the installation of hardwood flooring was considered to be an improvement to real property, and hence it was subject to both GST and PST. But there is a caveat to this answer: The government says that the various steps leading up to your purchase of hardwood floors used to mean that businesses in the supply chain paid 7 per cent PST but didn’t get it back in Input Tax Credits. With HST, a full 12 per cent will be returned at each step, meaning there should be savings passed along to the final consumer. What that translates to in terms of dollars off the product cost will be determined.

A good list of the tax changes put out by the BC government that’s easy to read and covers a lot of the things we’re all concerned about is available here.

Mr. Bonney's answer for Ontario: The Ontario Ministry of Revenue’s website specifies what is subject to the HST and what is not. There is also information on transitional rules about inventory and selling it, but no details as to how these will affect the cost of hardwood flooring.

Question from 'Internationalist:' For the sale of a residential building lot where the seller is a private individual non-GST registrant ... and the buyer is a builder and GST registrant ... Is the sale subject to GST/HST?... Who pays the tax and who collects and submits the tax?

Janet Kasun: Although it is generally the seller’s obligation to collect and remit the GST/HST, there is a special rule for real property transactions. Where the buyer is a GST registrant, as is the case in your question, it is the buyer’s obligation to self-assess and remit the tax. A GST registered buyer that is purchasing land for use in its business activities will generally be able to recover the tax paid by claiming an input tax credit. As the input tax credit will offset the GST/HST payable, the net result will be no tax actually paid.

It is important for sellers to be sure to confirm the registration status of the buyer on the date of closing. This can be done using the CRA’s GST Registry, which is available on the CRA website. A sale of vacant land by an individual may be exempt if the individual did not use the land for a business (including farming), the sale is not made in the course of the individual’s business or the individual did not subdivide the land more than once. In the transaction you describe, it is likely the buyer will be indifferent as to the tax status of the transaction. In those circumstances, unless the parties are absolutely sure the exemption is available, it is prudent for the buyer to simply self-assess the tax and claim the offsetting credit.

Question from 'Albin:' I agree that in many cases there are supply-chain cost savings that will offset the final tax, both for consumers and newly covered HST businesses. But not in my case, or my barber's, since he has been the most vocal objecter to the new tax. Do you have a sense of how many newly paying businesses will not have supply chain offsets to the cost of the new tax, and who are therefore feeling pressured to "eat" the tax and lose business income?

Mr. Bonney's answer for BC: Yes, it is true that businesses that are heavily dependent upon labour (such as a barbers) will probably not benefit from the HST. This is because they have few purchases to make that they would now benefit from having a 12 per cent input tax credit (getting the 7 per cent PST back as well as the 5 per cent GST) but would feel pressure to drop their take-home revenue to offset the increased cost to their customers of paying 12 per cent for their services instead of only the 5 per cent GST.

From the March, 2010 BC budget (page 121), one figure to note is the breakdown of goods and services for personal expenditures were 60 per cent on services and 40 per cent on goods. Thus, while the HST is a huge boost to the goods-producing sector, for services that weren’t subject to PST, the benefits are harder to find.

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