Without a doubt, the Harmonized Sales Tax (HST) is in force, as of July 1, 2010
in both Ontario and British Columbia (BC).
Are you ready for the changes which have come with the HST? Under HST, the provincial sales tax (PST) of 8% in Ontario and 7% in BC has been combined with the federal GST of 5% for a single tax of 13% in Ontario and 12% in BC. In addition, Nova Scotia’s HST rate has been increased to 15%, effective July 1, 2010.
While HST is new in Ontario and BC, a key point to note is the rules with respect to what is or is not subject to GST or HST have not changed. The only change is the rate of tax to be charged on a sale. You will need to consider the place of supply rules to determine what rate to use.
For example, you previously paid a charge of 5% GST on trainer fees, stud fees, boarding fees, veterinary fees, trucking, electricity, fuel and staking services. Effective July 1, 2010, the 13% HST in Ontario, 12% in BC and 15% in NS could apply.
Before the implementation of the HST, you paid no tax on straw, for example, or purses to owners. This remains unchanged. When you sell a horse with delivery in the United States, you do not charge GST. Again, this remains unchanged.
The HST could actually mean good things for most GST/HST registrants as the full amount of HST paid can generally be recovered as an input tax credit whereas the PST before harmonization was non-recoverable. For example, you can get back all the HST paid on pick-up trucks, trailers, computers, office equipment, telecommunications and vehicle repairs used exclusively in your business.
What does this mean for you? You need to consider what changes should be made to your accounting system or worksheets. They need to be updated to charge the correct rate of tax on invoices. If you are registered, your current GST registration number will continue to be reported on the invoice and a GST/HST return will still be used for the HST remittance to Canada Revenue Agency (CRA). If you are not registered, you should review if registering is right for you.
For those that are registered and have annual revenue over $1.5 million, electronic filing of your return will be mandatory starting with returns for reporting period on or after July.
Small business transition support and GST/HST registration
Ontario farms registered for GST/HST purposes before July may be eligible for a small business transition credit of up to $1.000.
Further information on the payment can be found at this link:
http://www.rev.gov.on.ca/en/
BC has not introduced a similar transitional support payment.
You should review your registration status. If your taxable sales have been over $30,000, then you must be registered and you can be subject to penalties and interest plus the tax you failed to collect. With the tax rate moving up to 12%, 13% and 15%, this exposure will only get larger. Even if your taxable supplies are under the registration threshold of $30,000, you may want to consider registering for the GST/HST. By doing so you, are able to recover the tax paid on any business purchases.*
Consider as well your filing frequency and the impact the new HST will have on your cash flows. If you are an annual GST return filer and often in a refund position, you may want to consider a move to quarterly or perhaps even monthly filing to get your refunds quicker. Those refunds are only going to get larger if you are in Ontario and BC as you will be paying a higher rate of tax that is refundable to you. You can elect to change your filing frequency on the first day of your fiscal year by completing form GST 20 and sending it in to CRA no later than 2 months after the commencement of that fiscal year.
Additional Resources
For more information you can also visit the CRA website at: http://www.cra-arc.gc.ca/gncy/
The CRA is also providing free information seminars to educate individuals / businesses on the upcoming HST. You can find further information on these seminars at: http://www.cra-arc.gc.ca/vnts/
* You can become a registrant by filing in Form RC 1 – Request for a Business Number or by calling the CRA . The RC 1 form and the CRA telephone number for registration are available at: http://www.cra-arc.gc.ca/tx/
This document was prepared by Grant Thornton LLP for Standardbred Canada. The information contained in this document comprises tax tips only and should not be considered tax advice. You should seek professional advice if you have further questions regarding the HST.