Everyone in Canada, especially in Ontario and BC, is aware (unless you have been living under a rock) that effective July 1, 2010, the taxes will be harmonized into 1 tax and must be reflected that way in our books. For those that have always sold products and charged PST, it may be just a matter of combining them into one tax. However, for those that only charged GST in the past, they will have to now charge the equivalent of the PST combined with the GST to make up the HST (I know… totally confusing and some would argue, absolutely unnecessary).

But… did you know that there is a transition period where some will have to start charging HST effective May 1st if they plan to deliver after July 1st? (still more confusion).

The following is a synopsis of this whole new HST transition and it is recommended that you look it over to see how you are affected.

B.C. and Ontario Announce HST Transitional Details

Yesterday morning, both B.C. and Ontario released details on the implementation of Harmonized Sales Tax (“HST”) in those provinces (to replace their respective provincial sales taxes, or “PST”). Given that both sets of rules were released at the same time, it should come as no surprise that they are identical in most respects.

Here’s a summary of the key provisions:

Key dates:

* July 1, 2010 – Implementation of the HST in B.C. and Ontario.

* May 1, 2010 – HST will have to be collected on amounts that are paid or payable on or after May 1, 2010 for goods or services provided on or after July 1, 2010.

* October 14, 2009 – Certain businesses and public service bodies (not for profits, charities, municipalities, schools, hospitals, etc.) may be required to self-assess the Ontario/B.C. component of the HST on amounts paid or payable after October 14, 2009 and before May 2010 for goods or services provided on or after July 1, 2010. Self-assessment will also be required for large businesses on items where the HST will be restricted. In general, a self-assessment is required on those transactions where the recipient is not eligible to claim a full recovery of the HST. Self-assessment is an issue since the supplier is not required to collect the HST on these transactions.

* October 31, 2010 (Ontario Only) – This is the date on which any outstanding PST becomes payable under the transitional rules to ensure an efficient wind-down of the PST. Practically, the Ontario PST regime will cease to exist on October 31, 2010.

GOODS

PST will apply to the taxable sale of goods if possession or ownership of the goods is transferred to the purchaser before July 1, 2010.

HST will generally apply to goods if possession and ownership of the goods is transferred to the purchaser on or after July 1, 2010.

SERVICES

PST will apply to the portion of taxable services performed before July 1, 2010.

HST will apply to the portion of services performed on or after July 1, 2010.

Exception – If 90% or more of the service has been performed before July 2010, only PST will apply.

The bulletins from both governments also describe specific transitional rules for funeral and cemetery services, passenger transportation services, freight transportation services, and prepaid subscriptions to newspapers, magazines and other periodicals.

LEASES AND LICENCES

In a nutshell, PST and HST are prorated for lease intervals that straddle the implementation date of July 1, 2010, with one exception for lease intervals that end prior to July 31, 2010 (as noted below).

PST applies to a supply of taxable goods by way of lease, licence or similar arrangement for the part of a lease interval that occurs before July 1, 2010, and HST applies thereafter. Needless to say, invoicing for these transition periods will be challenging.

For leased goods that were PST exempt, and for non-residential real property (which was also PST exempt), HST applies prorata for that portion of the lease that is after June 30, 2010.

Exception – PST will continue to apply, and HST will not apply, to a lease interval that begins before July 2010 and ends before July 31, 2010.

Commercial parking, which is essentially a lease of a parking space, is accordingly treated as such under the transitional rules.

MEMBERSHIPS

Memberships are taxed in the same manner as services. So, the portion of a membership that is applicable to the period commencing July 1, 2010 and thereafter is subject to HST. Special rules are in place for lifetime memberships.

ADMISSIONS

Prepaying (before July 2010) for entertainment, seminars or events is not going to forestall the application of HST. If the event in question takes place on or after July 1, 2010, HST applies.

OTHER TRANSITIONAL RULES

Specific transitional rules are proposed for certain other circumstances, including those in respect of direct sellers, continuous supplies, budget payment arrangements, combined supplies, progress payments, goods brought into each province, imports, and returns and exchanges. The details can be found in the respective Information Notices.

WIND-DOWN OF PST

On July 1, 2010, the existing PST will generally cease to apply.

Final PST returns will need to be filed by July 23, 2010. In addition, if a PST amount is collected or becomes payable after June 2010, the vendor would be required to account for that amount in a supplemental PST return to be filed on or before the 23rd day of the following month.

For Ontario only, all supplemental PST returns must be filed no later than November 23, 2010, as all heretofore uncollected PST becomes due on October 31, 2010. B.C. has no such deeming rule, and so some vendors may be filing PST returns long after their counterparts in Ontario have ceased.

In Ontario, existing assessment, objection, appeal and enforcement provisions under the PST legislation would generally remain in place where the applicable limitation periods have not expired. B.C.’s bulletin is silent on this issue.

TRANSITIONAL RST INVENTORY REBATE FOR RESIDENTIAL REAL PROPERTY CONTRACTS

In order to prevent both taxes from applying to residential construction contracts that straddle the implementation date, a rebate of PST will be available to the contractor. In other words, if the contractor has to collect HST, he will recover the PST he paid on his materials. The rebate application needs to be filed on or before December 31, 2010, and certain other conditions apply.

B.C. – WHAT’S MISSING?

Conspicuously absent from B.C.’s publications and pronouncements so far are transitional rules for new residential housing, with the Ministry of Finance only saying that they are “to be released in the coming months.”

Hope this helps everyone! Share with your subscribers, fans and followers if any are in Canada and, in particular, in Ontario or BC.

Don’tcha just love the tax man? NOT!!!


About the Author
Janice Byer is the mom of a teenage equestrian jumper, a horse lover and rider, and a successful entrepreneur. She and her family own a small hobby farm, Shady Ridge Farm (http://www.shadyridgefarm.ca) in Orangeville, Ontario where their two horses enjoy a lovely new barn and all the hay they can eat. As mentioned, she is also a successful web designer and specializes in helping other horse oriented businesses to get an eye-catching, customer-grabbing website or blog. Visit Equine Web Design at http://www.equinewebdesign.ca for more information.

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This entry was posted on Thursday, April 29th, 2010 at 10:21 am and is filed under Equine Web Designs, Hodge Podge, Horse Business, Ramblings. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.