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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 Ontario: Many CFIB members have also expressed their concern about the pressure of “eating” the tax, which will ultimately lower their margins. In terms of financial support available from government, Ontario’s small businesses will receive a one-time transitional credit. Most businesses (other than financial institutions) with less than $2 million in annual revenue from taxable sales will be eligible for a transition credit of up to $1,000. In addition, some businesses (such as the barber) will be able to claim input tax credits on their business purchases.

Question from 'Davey100:' I am currently making quarterly payments. The schedule for payments is based on what I collected last year. Does the switch to HST have an impact on my quarterly payments for the balance of 2010?

Janet Kasun: If you are a resident of either Ontario or British Columbia, yes, the switch to HST will have an impact on your quarterly payments for the balance of 2010. Assuming that you are not a “financial institution” for GST purposes, and that your fiscal year is the calendar year, you can expect your instalment payments to at least double for the last two quarters.

In December, the government passed legislation giving it broad powers to pass regulations in relation to harmonization. In particular, regulations may be made to determine the amount of instalment payments. Unfortunately, we have not seen any such regulations. So for now, all we can say with authority is that if no new regulations are made, the rules from 1997 will apply and your payments will double. The rates doubled in 1997 because at that time the federal GST rate was 7 per cent, the new harmonized rate was 15 per cent, so double was approximately the amount of the tax increase.

If new regulations are passed, you can likely expect a greater increase (5 per cent compared with 12 per cent or 13 per cent). If not, it is likely that your payment at the end of the year will be higher than normal.

Question from 'workerbee:' Apparently there is no PST or GST on fees paid to doctors, physiotherapists, naturopaths, optometrists, massage therapists, etc., and there also isn't any tax at all paid to opticians for glasses or to pharmacists for medicines. But apparently the pharmacist and the optician will get all the HST back that they pay for rent, utilities, telephone, supplies, etc., but the doctors, physiotherapists, massage therapists don't get back any of the HST that they pay for these things. What gives with that? Why does the pharmacist get back all of the HST he pays and the doctor get back none of it?

Mr. Bonney's answer for BC: The difference lies in the distinction between being “exempt” from GST/HST and being “zero-rated” for GST/HST. If you are exempt, it means GST/HST does not apply to goods or services provided by you to customers, but also that you do not claim input tax credits. Businesses that are exempt from GST/HST, including doctors, physiotherapists, optometrists (but not massage therapists or naturopaths, as they are subject to GST and will become subject to HST) do not get HST back from business costs, as the business-cost HST rebate is to offset the HST that is paid by those who have to pay HST in the first place.

While massage therapists and naturopaths will now have to charge 12 per cent HST instead of only 5 per cent GST, they will be able to claim the 12 per cent input tax credits. This applies so long as the business has above $30,000 in revenue. Drug dispensing fees are technically “zero-rated”, which means that GST/HST is not charged on the supply of these goods and services. However, a GST/HST registrant can claim an input tax credit for the GST/HST paid or owed on expenses made to provide zero-rated sales or supplies.

The BC government is providing a partial rebate of the provincial portion of the HST for eligible public service bodies. The rebates are designed to mitigate the impact of the HST while providing certainty for eligible entities. Public service bodies include municipalities and other eligible local government entities, eligible school authorities, universities, public colleges, and hospital authorities, and eligible registered charities and qualifying non–profit organizations.

Mr. Bonney's answer for Ontario: The general rule is if you collect GST/HST, you may recover the GST/HST you paid or owe on purchases and expenses related to your commercial activities by claiming input tax credits (ITCs) on line 106 of your GST/HST return. For complete details, go here.

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