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  • Harmonized Sales Tax (HST)

    In light of the HST conversion in Ontario and British Columbia and the rate increase in Nova Scotia the following FAQs are provided:

    Ontario and British Columbia

    1. What is the Harmonized Sales Tax (HST)?

    Starting July 1, 2010, the provincial sales taxes in Ontario and British Columbia would be replaced by a value-added tax structure and combined with the federal Goods and Services Tax (GST) to create a single, federally administered Harmonized Sales Tax (HST). The HST would be applied on most supplies of property and services made in those provinces at a blended rate of 13% in Ontario and 12% in British Columbia. With some exceptions, the HST would apply to the same base of property and services as the GST.

    2. Who would pay the HST?

    Almost everyone would have to pay the HST on purchases of taxable property and services (other than zero-rated supplies) supplied in those provinces. Businesses can recover the GST or the HST by claiming input tax credits (ITCs) for the tax that they pay or owe on purchases and expenses used in their commercial activities. Usually, commercial activities are those undertaken to provide taxable (including zero-rated) property and services. Only customers with valid exemption documentation would be exempted from HST.

    3. How does the HST apply to transactions that straddle the implementation date?

    Generally, the HST would be charged on a purchase where payment is made or becomes due after April 2010 but delivery of the goods or service is made on or after July 1, 2010.

    4. If I prepay in May 2010 for goods and services to be delivered in May, June and July how is tax applied?

    Under the HST transitional rules the taxes are applied based on when the goods and services are delivered. For example, the PST and GST is applied on May and June portions while the HST is applied on the July portion. The prepaid services will be prorate based on number of months within the billing cycle.

    5. If I am billed in July for arrear charges that was incurred in May, June and July how is the tax applied?

    Under the HST transitional rules the taxes are applied based on when the goods and services are delivered. For example, the PST and GST is applied on May and June portions while the HST is applied on the July portion. However, since a meter reading is taken only at the end of the billing period the overage charges will also be prorated based on the number of months within the billing cycle if billed on estimation; or the number of days if actual meters are taken.

    6. Why are there tax adjustments on the invoice?

    According to the HST transitional rules, PST and GST is applied on the portions of your billing prior to July 1 and HST applied to portions after July 1. To process your invoices you simply refer to the GST and PST payable and HST adjustment to derive at the net tax payable. This adjustment will only appear during the HST transitional period.

    7. If I purchase a good before July 2010 that is subject to PST, but return it on or after July 1, 2010 but before November 2010 then how is the tax applied?

    The tax application will depend on the net impact of the transaction:

    If the good is returned and a full refund is given then the PST and GST would be refunded;

    If an exchange results in a partial refund then the PST and the GST on the refunded portion would also be refunded;

    If an exchange results in additional payments, then the PST would not apply but the HST would apply to the additional payment;

    If an exchange results in neither a refund nor an additional payment then no PST is refunded and the provincial component of the HST would not apply.

    If the PST did not apply to the good that was purchased before July 2010, and it is exchanged on or after July 1, 2010 then the HST would apply on the full purchase price of the replacement good.

    8. If I return or exchange a good on or after November 1, 2010 then how is the tax applied?

    If the good is returned on or after November 1, 2010 no PST adjustment would be available at the point of sale. However, the purchaser may make an application for a refund of PST for tax paid in error. Purchasers would be able to file the application for refund with the B.C. Ministry of Finance or Ontario Ministry of Revenue depending on which province the goods were originally purchased in.

    9. How can I seek a refund of taxes paid in error?

    British Columbia PST refunds can be sought using this form. The mailing address is indicated at the bottom of the form. http://www.sbr.gov.bc.ca/documents_library/forms/0413FILL.pdf

    Ontario PST refunds can be sought using this form. The mailing address is indicated at top of the form.http://www.rev.gov.on.ca/en/forms/rst/pdf/0298.pdf

    10. Will current tax exemptions still apply?

    A major change with the HST system is that most exemptions that are in place today will no longer apply after June 30, 2010. HST will be applicable on most goods and services. There will be some customers that still have valid exemptions that are supported with written documentation. Any new exemptions will also require written documentation to validate the exemption.

    11. Where can I get more information about the HST conversion?

    Additional information is available at the following websites:

    http://www.cra-arc.gc.ca/gncy/hrmnztn/menu-eng.html

    http://www.sbr.gov.bc.ca/business/Consumer_Taxes/Harmonized_Sales_Tax/hst.html

    http://www.rev.gov.on.ca/en/taxchange/publications.html

    Nova Scotia

    1. What is the new HST rate in Nova Scotia?

    Effective July 1, 2010 the HST rate in Nova Scotia will increase from 13% to 15%.

    2. If I prepay in May 2010 for goods and services to be delivered in May, June and July how is tax applied?

    Under the HST transitional rules the taxes are applied based on when the goods and services are delivered. For example, the 13% rate would be applied on May and June portions while the 15% would be applied on the July portion. The prepaid services will be prorated based on the number of months within the billing cycle.

    3. If I am billed in July for arrear charges that was incurred in May, June and July how is the tax applied?

    Under the HST transitional rules the taxes are applied based on when the goods and services are delivered. For example, the 13% would be applied on May and June portions while the 15% would be applied on the July portion. However, since a meter reading is taken only at the end of the billing period the overage charges will also be prorated based on the number of months within the billing cycle if billed on estimation; or the number of days if actual meters are taken.

    4. Why are there tax adjustments on the invoice?

    According to the HST transitional rules, 13% HST is applied on the portions of your billing prior to July 1 and 15% HST applied to portions after July 1. To process your invoices you simply refer to the HST payable and HST adjustment to derive at the net tax payable. This adjustment will only appear during the HST transitional period.

    5. If I purchase a good before July 2010 that is subject to HST rate of 13% but return it on or after July 1, 2010 then how is the tax applied?

    The tax application will depend on the net impact of the transaction:

    If the good is returned and a full refund is given then the HST at 13% would be refunded;

    If an exchange results in a partial refund then the HST rate at 13% on the refunded portion would also be refunded;

    If an exchange results in additional payments, then the HST rate at 15% would apply to the additional payment;

    If an exchange results in neither a refund nor an additional payment then HST would be neither refundable nor payable.

    6. Where can I get more information about the HST rate increase?

    Additional information is available at the following website:

    http://www.gov.ns.ca/finance/en/home/taxation/harmonizedsalestax/default.aspx