What Are the HST Place of Supply Rules for Customs Brokers’ Services?

(Trade Lawyers Blog Cyndee Todgham Cherniak, Lang Michener LLP)

On February 25, 2010, the Department of Finance released a News Release about what will be the harmonized sales tax (“HST”) place of supply rules and shortly thereafter the Canada Revenue Agency released a GST/HST Notice setting out their administrative position. On April 30, 2010, the Department of Finance released Draft Regulations in respect of Place of Supply of Property and Services (the “Draft Regulations”). There is a separate HST place of supply rule for customs brokerage services. Read more here.

Nova Scotia Harmonized Sales Tax Rate Change

(CBSA)

Effective July 1, 2010, the Harmonized Sales Tax (HST) rate in Nova Scotia will increase from 13% to 15%, 5% of which is the federal portion and 10% of which is the provincial portion.

Impact on Imported Goods

Starting July 1, 2010, the CBSA will apply the new HST rate to all non-commercial goods imported into Canada by or for a consumer who is a resident of Nova Scotia. Please note that the HST applies to non-commercial goods destined for Nova Scotia regardless of where the goods enter into Canada.

“Non-commercial goods” means all goods other than goods imported into Canada for sale or for any commercial, industrial, occupational, institutional, or other like use.

Tobacco taxes and provincial alcohol markups will continue to be collected according to the province of entry.

As is the case today, the provincial component of the HST will not generally apply to commercial goods that are imported by an HST registrant for consumption, use, or supply exclusively in the course of the commercial activities of the registrant.

Although the provincial portion of the HST is not payable when commercial goods are imported into Canada and destined for a participating HST province, the goods may be subject to self-assessment rules. For more information about the self-assessment rules, please consult the Canada Revenue Agency (CRA) Website.

Goods Exempted from the Provincial Portion of the Nova Scotia HST

The province of Nova Scotia has expanded its list of goods that will be eligible for a point-of-sale rebate of the provincial portion (10%) of the HST. The list now includes:

• children’s diapers;
• children’s clothing;
• children’s footwear;
• feminine hygiene products; and
• books.

The CBSA will automatically apply the rebate to qualifying goods being imported into Canada and destined for Nova Scotia.

To obtain a complete list of these exemptions, please refer to the exemption table.

D-Memo Updates: HST Changes

(CBSA)

D2-3-6 Revised: Non-commercial Provincial Tax Collection Programs

This memorandum has been revised to reflect the Harmonized Sales Tax (HST) implementation in Ontario and British Columbia, and the HST rate change in Nova Scotia.

D17-1-22 Revised: Accounting for the Harmonized Sales Tax, Provincial Sales Tax, Provincial Tobacco Tax, and Alcohol Markup/Fee on Casual Importations in the Courier and Commercial Streams

This memorandum has been revised to reflect the Harmonized Sales Tax (HST) implementation in Ontario and British Columbia, and to provide the updated HST rate in Nova Scotia.

Canada Border Services Agency’s Implementation of the Ontario and British Columbia Harmonized Sales Tax

(CBSA)

Implementation Date and Rates

In accordance with an agreement between the Government of Canada and the provincial governments of Ontario and British Columbia, effective July 1, 2010, the Canada Border Services Agency (CBSA) will begin collecting the Harmonized Sales Tax (HST) on non-commercial goods imported for use in the provinces of Ontario (13%) and British Columbia (12%).

“Non-commercial goods” means all goods, other than goods imported into Canada for sale, or for any commercial, industrial, occupational, institutional, or other like use.

Impact on Imported Goods

Beginning July 1, 2010, the importation into Canada of non-commercial goods by or for a consumer that is a resident of Ontario or British Columbia, will be subject to the HST. The HST will apply to non-commercial goods destined for Ontario and British Columbia, regardless of where the goods enter into Canada.

Tobacco taxes and provincial alcohol mark-ups will continue to be collected according to province of entry.

As is the case today, the provincial component of the HST will not generally apply to commercial goods that are imported by an HST registrant for consumption, use or supply exclusively in the course of the commercial activities of the registrant.

Although the provincial portion of the HST is not payable when commercial goods are imported into Canada and destined for a participating HST province, the goods may be subject to self-assessment rules. For more information about the self-assessment rules, please consult the Canada Revenue Agency (CRA) Web site web site.

Goods Exempted from the Provincial Portion of the HST

Certain non-commercial goods being imported into Canada and destined for Ontario and British Columbia are exempt from the provincial portion of the HST. The list of exempted goods varies by province.

For a complete list of these exemptions, please refer to the exemption table.

Additional Information

For more information, within Canada, call the Border Information Service at 1-800-461-9999. From outside Canada, call 204-983-3500 or 506-636-5064. Long distance charges will apply. Agents are available Monday to Friday (08:00 – 16:00 local time / except holidays). TTY is also available within Canada at 1-866-335-3237.

Be HST Ready: Resources for Businesses

(Canada Revenue Agency)

The following is now available on the CRA Web site: Be HST ready: Resources for Businesses

Anti-HST Campaign Grows in Strength

(Justine Hunter — Globe & Mail)

Petitioners say they have enough signatures in 83 of 85 ridings to force Campbell to back down

British Columbia’s map is increasingly painted in “No HST” colours, but Premier Gordon Campbell vowed Tuesday to press ahead with the tax change despite the political price he is paying.

“I think there's probably only one thing in the province less popular than the HST and that's potentially me at this particular moment,” Mr. Campbell said.

Earlier in the day, organizers of a petition to repeal the new tax under B.C.’s citizen-driven initiative process announced they have already gathered enough signatures in 83 of the province’s 85 ridings to meet the requirements to force Mr. Campbell’s government into retreat. Read more here.

Ont., B.C. Lead Recovery This Year, Despite Introduction of HST: Conference Board

(Sunny Freeman — The Canadian Press)

Outstanding economic growth in Ontario and British Columbia – the provinces that will be hit with a controversial new tax regime this summer – will lead a nationwide recovery from last year’s downturn, the Conference Board of Canada has predicted in a report. Ontario and B.C. will see their economies grow by 3.8% over last year, despite the planned introduction of the harmonized sales tax on July 1 expected to raise consumer prices in both provinces, the private-sector economic forecaster said in its Provincial Outlook report published Monday.

“There are clear signs of economic recovery from coast to coast,” said Marie-Christine Bernard, associate director of provincial forecasting at the Conference Board. “The improved domestic economies of Ontario and B.C., along with increased demand from the United States, will support a strong rebound in both provinces.”

Overall, the Canadian economy’s gross domestic product is expected to be up 3.2% compared with last year, which began with one of the deepest recessions in decades following the financial crisis that erupted in the final months of 2008.

“Considering the epic collapse of the global economy in 2008 and 2009, Canada’s situation today is remarkably good,” the board said in its provincial outlook. The Conference Board expects growth to be even stronger in 2011, advancing to 3.3%, as increasing private capital investment and improving trade performance offset subsiding federal and provincial government spending. Read more here.

Proposed HST Place of Supply Rules Are Game-Changers

(Lexology – Cyndee Todgham Cherniak, Lang Michener LLP)

On February 25, 2010 (88 days until harmonization implementation in Ontario and British Columbia), the Department of Finance released the proposed harmonized sales tax (HST) place of supply rules.

All GST/HST registrants are generally required to collect the provincial HST component (at the applicable rate) on supplies of property and/or services made in a participating province except where a supply is zero-rated or exempt.

The HST place of supply rules are important for businesses that operate in, or make supplies in, or to recipients located in, more than one Canadian province. The HST place of supply rules will be used by suppliers and recipients to determine whether a supply made in Canada is made in a participating province. Specific rules will apply depending on the nature of the supply. Read more here.

Small Biz to Gov: Red Tape-Trimming Targets for 2010

(GHY International)

The Canadian Federation of Independent Business (CFIB) has proposed ten specific areas for governments to work on in 2010 that will lighten the $30 billion annual load for Canada’s businesses.

According to CFIB’s latest report, 81% of small businesses believe that government does not consider the impact on business when it regulates. “Making progress on the list below would go a long way towards demonstrating that government values the critical contribution that small businesses make to Canada. It’s not comprehensive, but it is a good start,” said CFIB’s vice-president of national affairs, Corinne Pohlmann.

The following three recommendations may be of particular interest to clients:

Create a GST/HST Taxpayer Fairness Code
Canada Revenue Agency (CRA) should adopt a GST/HST Taxpayer Fairness Code. Complying with sales tax rules is the top frustration of small business owners. Businesses collect sales tax revenue on behalf of government and deserve good customer service, including clear answers to questions in a timely manner. The Tax Fairness Code should be modeled after BC’s code where business owners have the right to get questions answered in writing and any written government tax advice will be respected even if it is wrong. Taxpayers need to trust that if they have followed guidance provided by CRA officials, they will not be penalized.

Bring fairness and accountability to the Canadian Food Inspection Agency (CFIA)
Agri-business owners understand that a certain amount of regulation is important for food safety, but the CFIA could significantly improve the way it interacts with small businesses. A recent small business report card on CFIA found that fairness is lacking and many feel they have no recourse when dealing with CFIA authorities. A Food Producers’ Ombudsman with real powers to oversee how CFIA interacts with small businesses should be appointed.

Simplify the customs process
Canada Border Services Agency (CBSA) should reform the Duty Drawback program. Claiming customs duty refunds imposes such onerous paperwork burden on Canadian firms that many smaller firms who import and export are forfeiting money owed to them or choosing to operate in the U.S. rather than in Canada. One farmer has to fill out 400 forms for every container imported. His paperwork then has to be stored for seven years. The government should eliminate unnecessary duties and reduce record retention requirements for remaining duties.

Read the complete list of recommendations here.

New on the CRA Website

(Canada Revenue Agency)

Government of Canada announces new electronic filing requirements for GST/HST registrants and penalties and fines for non-filers.

Preparing for the HST – January 26, Toronto

(IE Canada)

Effective July 2010, companies that do business in Ontario and British Columbia will be faced with the harmonized sales tax (HST), a single tax combination of the PST and GST. The HST has the potential to affect cash flow, software and systems requirements, and human resource planning.

Yet, out of almost 500 executives surveyed recently by KPMG, only 17% felt they were well prepared for the new Ontario HST.

Put yourself in the lead by preparing now.

Join I.E.Canada on January 26 at a breakfast seminar hosted by KPMG. Tax expert John Bain will provide an up to date briefing on the HST focusing on key issues for importers and exporters. The presentation will consider the HST transitional rules, cash-flow implications and other compliance issues.

Register today. Facing these challenges and getting an early start on the transition could put you ahead of the competition. To register, please click here: here and for further details, please click here.

Controversial HST Bill Passed in Ontario

(CBC News)

Legislation to create a single 13% sales tax in Ontario passed third and final reading Wednesday despite strong objections and delaying tactics by the Opposition. Finance Minister Dwight Duncan told the legislature that blending the five per cent goods and services tax with the provincial tax will lower costs for businesses, allowing them to cut prices for consumers and hire more staff.

“Doing nothing is not an option [and] the status quo is just absolutely the wrong thing,” Duncan said in third-reading debate. “This package will create jobs.” The government estimates the harmonized sales tax (HST) will help create almost 600,000 jobs in Ontario over the next decade.

In an interview from Mumbai, India, Premier Dalton McGuinty said he is convinced the HST is critical to help reposition Ontario as it comes out of a recession in which the province lost hundreds of thousands of jobs.

“I think people understand in their heart of hearts that our world has changed and the old world is not coming back,” said McGuinty. “There are a number of things that we need to do to adjust to the new reality and secure a better future for our families, and one of those is to put in place a modern, competitive tax system.”

The opposition parties failed to convince the government to hold public hearings on the HST bill across the province, and accused the Liberals of being afraid to face a voter backlash against the new tax. The Liberals used their majority “to ram through the HST bill as quickly as possible and with little debate as possible,” said NDP Leader Andrea Horwath.

The Progressive Conservatives reluctantly admitted defeat after weeks of trying to block the HST, including a 44-hour occupation of the legislature by two Tories, asking for frequent votes to delay proceedings, and repeatedly calling McGuinty a liar. Read more here.

OTA Encouraged by HST Change

(Trucking.com)

Ontario Trucking Association president David Bradley welcomed the introduction in the Ontario Legislature of legislation enacting the government’s proposed new harmonized tax system.

Bradley was particularly pleased to note that according to the government's background material, as part of the transition to the HST and wind-down of the RST, the Multi-Jurisdictional Tax (MJVT) will also be wound down and that under the transition rules the MJVT would simply no longer apply to renewals or new registrations under the IRP on or after July 1, 2010.

“For the Ontario trucking industry the fact that the government has moved forward on its budget commitment to harmonize the provincial sales tax with the federal goods and services tax starting next year is extremely good news,” Bradley said. “OTA has been seeking this announcement for a number of years and it’s been a key recommendation of virtually every OTA pre-budget submission this decade. The introduction of the legislation today is great news for the industry.” Read more here.

Selinger Scuttles Talk of HST for Manitoba

(CBC News)

A harmonized sales tax is not on the horizon for Manitoba, Premier Greg Selinger said Monday. Selinger effectively put an end to HST speculation by firmly stating that harmonization would not be part of his government’s coming budget. Manitobans would pay $400 million more each year in taxes if the PST and GST were merged into an HST, Selinger said. A harmonized tax would be collected on such untaxed items as books and children’s clothing, which are exempt from the PST.

In August, when he was finance minister, Selinger said he was weighing the pros and cons of harmonizing the provincial sales tax with the GST after federal Finance Minister Jim Flaherty said he was prepared to cut cheques to Saskatchewan, Manitoba and Prince Edward Island to sign on to tax harmonization.

Selinger was named the province’s premier after winning a leadership contest against Steve Ashton on October 17. Selinger replaced Gary Doer, who has been the premier since 1999 and party leader since 1988. Doer announced August 27 he was stepping down. The next day, he was appointed Canada’s next ambassador to the U.S. Just two weeks before his announcement, Doer said he was seriously looking into the HST. When 94% of the country is moving toward harmonization, Manitoba has to look seriously at the pros and cons, Doer said at the time.

Ontario and British Columbia HST

(CSCB)

The Canada Revenue Agency (CRA) has published GST/HST Notice 247. This notice provides additional information on the collection of HST in Ontario and British Columbia, scheduled to come into effect on July 1, 2010.

Pages 6 and 7 of this notice include information on imported goods and services, and a lengthy question and answer section is included at the end of the notice.

In particular, it should be noted that the provincial part of the HST generally applies to non-commercial goods, that is, it is generally collected on casual goods only. This is the same practice as in the three provinces that currently collect HST.

Flaherty’s HST Pitch Fails to Woo Holdouts

(CBC News)

A day after Ottawa offered cash to provinces to harmonize their sales taxes across the country, the few holdouts remain cool to the HST idea.

On Tuesday, Finance Minister Jim Flaherty said Ottawa was willing to offer financial support to provinces choosing to harmonize their provincial sales tax with the federal GST.

Business groups like the idea because they argue it reduces red tape and lowers the tax on investment. But harmonization detractors argue it ends up costing consumers more in real terms because the GST applies to more goods and services than the provincial levy.

Though he stopped short of rejecting the plan outright, P.E.I. Premier Robert Ghiz says it will take more money than Ottawa is currently offering if he is to consider harmonizing provincial sales tax with the GST.

He said the revenue loss to the province must be offset before considering any harmonization proposal, and specifically requested that exemptions be allowed allowed for home heating fuel and clothing.

In P.E.I.’s case, the blended tax would actually be lower. He acknowledged the plan would mean a tax cut for Islanders, but he also wants to ensure the province can afford to protect those most vulnerable, he said.

In Manitoba, a spokesperson for Manitoba Finance Minister Greg Selinger confirmed the province is looking at the offer. The province’s stance has traditionally been against any harmonization plan, but Ottawa’s subsidy offer appears to be enough to at least consider the proposal. Read more here.

B.C. to Harmonize Sales Tax with GST

(Patrick Brethour — Globe & Mail)

British Columbia will harmonize its provincial sales tax with the federal GST, B.C. Finance Minister Colin Hansen has just announced.

The harmonized sales tax in B.C. will be 12 per cent, the lowest for those provinces that have agreed to combine their provincial sales taxes with the GST, he said in a press conference this morning.

B.C. Finance Minister: Read the official announcement

The change, to take effect on July 1, 2010, will reduce sales taxes paid by business by $1.9-billion and save businesses $150-million in administrative costs.

That's the same date that Ontario will make the leap to a harmonized sales tax, or HST – a change that spurred British Columbia’s move.

“B.C. cannot be left behind,” Mr. Hansen said. Read more here.

Ontario Sales Tax Reform: Small Pain for (Hopefully) Longer Term Gain

(CBC News)

Ontario’s budgetary move to blend its provincial sales tax with the federal goods and services tax might have some political watchers puzzled.

After all, Ontario has been hard hit by a manufacturing meltdown, especially in the auto sector. Thus, provincial unemployment is rising, making Ontario residents particularly crabby these days.

To analysts, boosting prices on household goods does not seem the best way for Ontario’s premier, Dalton McGuinty, to wiggle his way into voters’ good graces.

But, most economists sing in unison when it comes to tax harmonization.

These practitioners of the dismal science generally agree that, when a province adds its sales tax, eight per cent in Ontario’s case, to the current five per cent national GST, the region and the country as a whole win in terms of economic expansion and increased productivity.

“This tax reform is long overdue as Ontario struggles to put its economy on a better growth path,” wrote Jack Mintz, a University of Calgary economics professor and former president of the C.D. Howe Institute recently. Read more here.

CTF and Business Debate Ontario Tax Harmonization

(Canadian Taxpayers Federation)



Kevin Gaudet of the Canadian Taxpayers Federation and and Len Crispino of the Ontario Chamber of Commerce discuss the merits and drawbacks of Ontario's plan to harmonize the PST with the GST on the CTV program Canada AM.

Ontario to Merge Sales Tax with Federal Tax: Reports

(Reuters)

The government of Ontario will unveil tentative plans to harmonize its provincial sales tax with the federal sales tax in its budget on Thursday as it tries to help businesses weather the recession, several newspapers reported on Wednesday. The proposed reforms would see Ontario merge its 8% sales tax with the 5% federal good and services tax.

The reports said the changes are designed to help make businesses more competitive since the new harmonized system would allow companies a refund on taxes paid on goods and services to run their operations.

The move might anger consumers, however, as they may see increased taxes on items such as heating oil, diapers and children’s clothing, all which are now exempt from the provincial sales tax.

Earlier this month the province’s finance minister said Ontario would run a deficit of around C$18 billion ($14.6 billion) over the next two years as it spends money to try to stimulate the economy.

The Globe and Mail said the tax reforms are part of a move by the province to address its reversal of fortunes as the economy of Ontario, once the country’s richest province, has been one of the hardest hit by the recession. Read more here.