Harmonized Sales Tax Tips (HST)
The Harmonized Sales Tax (HST) System went into effect in Ontario on July 1st, 2010. It replaced the separate GST and PST taxes that exist for businesses today.
The HST will be applied on most supplies of goods sold and services provided in Ontario at a rate of 13%, consisting of the 5% federal portion and an 8% provincial portion.
As with every tax change that takes place, there are numerous questions that business owners have. We’ve tried to address some of the most common questions.
If you need help in understanding how this change affects your individual business, our consultants are available to assist you, or make the necessary changes to your accounting software system.
Do I need to Apply for a New HST number?
If you are already a GST registrant in Ontario, you do not need to re-register for an HST number. Your existing GST number now becomes your HST number. Your PST number is no longer needed but you will need to file your June,2010 PST return. The federal government has also retained the Small Supplier Exception. This exception states that if your business has less than $30,000 in annual revenue, you are not required to register for an HST number.
How often do I have to remit my HST?
You will have to report and remit your HST according to your current GST filing frequency. If you currently submit GST returns quarterly, then you will now remit HST quarterly. If your quarter overlaps the July 1st date, you will have to collect/report GST on the period prior to July 1 and HST on the period after July 1.
Do I charge HST on everything?
Most of the products you sell now will see no new tax. Those products or services which you currently charge GST and PST will now be replaced by the single HST tax. There are items now that have no sales tax on them such as basic groceries, music lessons, and prescription drugs. On July 1, 2010, there will still be no HST charged on these items.
The biggest change for most small business owners will be those who provide straight services to the customers. For example, hairdressers, accountants, IT consultants would only charge GST in the past. All services are now subject to the HST tax, and unfortunately your clients will get an increase in price.
I’ve heard about a point-of-sale rebate. What does this mean to me?
In order to keep us in a perpetual state of confusion, the Federal Government has deemed some products eligible for a point of sale rebate. This means that you are entitled to provide to your customers a rebate of the 8% Provincial portion of the HST and only charge them 5%. Some of the items which fall into this category are print newspapers, books (including audio books), diapers, children’s clothing and footwear, children’s car seats and booster seats, feminine hygiene products, and qualifying prepared food and beverages sold for $4.00 or less.
Will my Quickbooks or Simply Accounting Software update automatically?
Unfortunately no. However, both Software Systems have released HST set up wizards. They will need to be downloaded into your software, so if you don’t update your software on a regular basis, you may want to do so now. Although they both profess to make the transition to HST a breeze, don’t try and do it the morning of July 1st as Murphy is steadfast in declaring that when you really need something to go smoothly, it won’t. These wizards will only run with the 2010 versions of the software, so if you are running older versions, you don’t necessarily need to upgrade, however you will have to set up the new HST tax code manually.
AIS Solutions can help make your transition a smooth and simple process. Call us now toll free at, 1 888 575 5385.