HST - Impact On Other Provinces

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In an effort to achieve greater efficiencies, the provincial governments of Ontario and British Columbia are harmonizing their respective sales tax with the federal Goods and Services Tax (GST). While the provinces tout the benefits of combining the taxes, such as reducing compliance costs and attracting new investment and jobs, there are some specific issues that will impact you.

What You Need to Know

If you are registered for GST, you are automatically registered for the Harmonized Sales Tax (HST). This combined tax is comparable to the HST that exists in the Maritime provinces that harmonized their sales taxes with the GST more than a decade ago. Effective July 1, 2010, B.C.’s and Ontario’s Provincial Sales Tax (PST) will be eliminated and replaced by the HST. From this date forward, all sales of goods, services, certain real property and intangibles “supplied” in B.C. will be taxed at 12% HST; while Ontario will be taxed at 13% HST.

Managing the Transition

The GST/HST rules are different for supply of goods, services and intangible property. It’s important you work with your tax advisor to understand how the rules impact your unique situation.

Sale of Goods and/or Services

If you run a business and provide goods or services to customers in other provinces, you need to understand what GST/HST rates apply. There may be further complications if you have a contract to provide your services that began before the HST effective transition date. For instance, over June, July and August of 2010, would you know the correct tax rate to charge clients in Alberta?

Intangible Property

If you run a business and sell intangibles, such as memberships, copyrights, access to software, or digital files to a client in ON or B.C. you need to understand what GST/HST rates apply. For instance, if a digital image company operating in Alberta sells images to someone in Ontario, what tax rate should be charged?

Other Considerations

Regardless of where you operate your business, if you do business with another province, the GST/HST place of supply rule can be quite complex. Some of the factors that may affect the application of GST/HST include: