Tax Tip Thursday

I would like to talk about Provincial sales taxes, HST and sales in the US.

As most people know, every province has a difference sales tax, sometimes in addition to GST. As a business owner, if you are selling into other provinces it is important that you understand both your reporting as well as remittance obligations.

This is a really big can of worms and sometimes services and products are handled differently between provinces, but can also be very dependent on what you are selling.

I could go on about this for a long time, but will be brief in the interest of time and complexity of the issue.

PST

While most people do not even know that PST still exists, if you are a business selling outside of Ontario – you need to know!

Most provinces require you to pay a sales tax (PST) if you are selling something to a consumer or a business in their province. For a couple of the provinces there are thresholds, but most do not. What that means is if you do not sell more than the threshold amount, you are NOT required to registered with the provincial tax department and are NOT required to collect to remit the provincial taxes. There will be GST though and that still needs to be collected and remitted to the federal government. For example, the threshold in Quebec is $30k and BC is $10k, and Alberta does not have a provincial sales tax, but everyone pays 5% GST.

If you have met the threshold and/or have sales in other provinces, you NEED to register with the provincial tax authority and follow their program and ensure that you keep good records and remit as required.

That’s right we are back to good bookkeeping! We have clients that have I think we have ½ dozen different provincial taxes to track and remit! Make sure you know the rules and do your research or of course come to see us!

Some of them are combined (like Ontario) and you only need to remit the combined HST to the federal government.

HST

Another thing to watch out for is HST. In addition to the 13% that we are all too familiar with in Ontario, there are actually some other “codes” that are very important when doing your bookkeeping.

Most do not know or understand these codes, but they can make a very big difference to your taxes, so you will want to make sure you get them right.

Zero rated

These are taxable supplies, but at a rate of 0%. A lot of business with the US is like this. It is VERY important as it means that you can claim the ITCs on the supplies associated with any sales that are zero rated. VERY important!

Exempt

This is reserved for supplies that are declared as exempt from GST – such as service charges, residential rent and sales, insurance, supply of local transportation. There are a whole host of supplies that fall in this category.

Out of scope

Out of scope is basically companies that are not registered for HST and a lot of government services.

Pay Your Taxes!

It is a very complex system that can be difficult to manage on your own. But if you don’t, you could find yourself in a heap of trouble come tax time. You could try to do it yourself, but we always recommend hiring a professional. We are experienced and get it right the first time, so make an appointment today!

Disclaimer:

This article provides information of a general nature only. It is only current at the posting date. It is not updated and it may no longer be current. It does not provide legal or tax advice nor can it or should it be relied upon. All tax situations are specific to each individual. If you have specific tax questions you should book an appointment for a 1 on 1 consultation.