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Accounting Services Barrie

Ontario Harmonized Sales Tax, HST

The 8% Ontario sales tax and the 5% GST are being combined into a single 13% value-added sales tax that will be federally administered, starting July 1, 2010.

What is Taxable?
Consumers will now have to pay 13% HST on all goods and services on which they previously paid 5% GST, except for several items which are currently RST exempt and will not be subject to the provincial portion of the HST.  The following are some made-in-Ontario components:

  • Books, children's clothing and footwear, diapers, children's car seats and car booster seats, and feminine hygiene products would be exempt from the 8% provincial portion of the tax.
  • Purchasers of newly constructed homes under $400,000 will not be subject to an additional tax burden.  Buyers of new homes valued between $400,000 and $500,000 can claim a proportional rebate.
  • New rental housing rebate, similar to the enhanced new housing rebate, for new residential rental properties.
  • Up to $400 million in one-time sales tax credits will be provided to help small businesses make changes to point-of-sale and accounting systems.
  • Provincial portion of the tax rate on transient accommodation, such as hotel rooms, will rise from 5% to 8%.  Approximately $40 million a year will be allocated to support destination marketing in Ontario tourism regions once these are established.
  • Additional point-of-sale exemptions announced November 12, 2009:
  • Print newspapers
  • Qualifying prepared food and beverages that are ready for immediate consumption and are sold for a total price of not more than $4.00
  • Used vehicles purchased privately (not from an HST registrant) will still be subject to a retail sales tax (RST) of 13% (increased from 8%).
  • Ontario RST will continue to apply at 8% on certain types of insurance, including house insurance, group insurance, contributions paid into funded plans or on benefits paid out of unfunded plans as well as payments made into insurance schemes or compensation funds established under an Act of Canada or Ontario.  This is in addition to the Premium Tax on certain insurance premiums.  See Ontario HST - Insurance Premiums and Premium Tax on the Revenue Ministry website.

The Ontario Ministry of Revenue has a page titled "What's Taxable Under the HST and What's Not?".  The tables on this page show in detail which items will be subject to a higher tax under the HST, and which ones will not.

Input Tax Credits
Businesses which are registered to collect GST or HST can claim input tax credits to recover the GST or HST that they have paid, with certain temporary exceptions for large businesses (see below).  The change to HST will mean a significant savings and boost in productivity for businesses in Ontario, because:

  • they will no longer have to pay PST
  • they will no longer have to prepare PST remittances
  • they will save on consulting costs - the PST rules are very complicated, and frequently require professional advice in their interpretation
  • employees will spend much less time trying to find the answers to PST questions
  • PST audits will be eliminated

There will be a temporary restriction on input tax credits on certain items for large businesses (generally, those with over $10 million of taxable, including zero-rated, sales) and financial institutions.  The restriction will only apply to the provincial portion of the HST.  For more information see the following on the Ministry of Finance website:

Ontario Sales Tax Transition Benefit (OSTTB)
As part of the sales tax reform, cash payments will be provided to Ontario tax filers, in each of June and December 2010, and June 2011.

  • Eligible families with income of less than $160,000 would receive 3 payments totalling $1,000.
  • Eligible individuals who earn less than $80,000 would get 3 payments totalling $300.
  • To qualify for the 2 payments in 2010, a 2009 tax return would have to be filed.
  • Individuals who turn 18 prior to December 1, 2010, or who have a spouse or common-law partner or live with a dependent child on May 31 or November 30, 2010, will qualify for 1 or 2 of the 2010 payments.
  • To qualify for the 2011 payment, a 2010 tax return would have to be filed.

For details see:

Tax Tip:  Make sure you file your 2009 and 2010 tax returns to get this benefit.

Proposed General Transitional Rules for Ontario HST
Transitional rules are required to determine which tax - the existing Retail Sales Tax (RST) or the Ontario component of the HST - would apply to transactions that straddle the July 1, 2010 implementation date.

October 14, 2009
Certain purchasers that are non-consumers have to self-assess the Ontario component of the HST on consideration that becomes due, or is paid, after October 14, 2009 and before May 1, 2010 for goods and services provided on or after July 1, 2010.  This would not apply if the non-consumer is a GST registrant and would therefore be entitled to an input tax credit

Note:  Consumer means an individual who acquires goods or services for the individual's personal consumption or use or for the personal consumption or use of another individual.  See the detailed information in Canada Revenue Agency's Notice 247 regarding this topic.

A GST registrant in BC or Ontario should not be collecting the provincial portion of the HST prior to May 1, 2010, for goods or services provided in BC or Ontario, even if the goods or services are to be provided on or after July 1, 2010.  Prior to May 1, only the 5% GST should be collected for these goods or services.

May 1, 2010
The HST would generally apply to consideration that becomes due or is paid on or after this date, for property and services provided on or after July 1, 2010.

Some items addressed in the proposed HST transitional rules:

  • Funeral services - HST will not apply to funeral services where the contract is entered into before July 1, 2010.
  • Transitional RST inventory rebate for residential contracts - A rebate will be available for RST embedded in construction materials purchased before July 1, 2010, but used in residential property contracts on or after July 1, 2010.
  • Subscriptions to newspapers, magazines and other periodical publications - HST will not apply to subscriptions paid before July 1, 2010.
  • Passenger transportation services - HST will generally not apply to round-trip journeys that commence before July 1, 2010.
  • Freight transportation services - HST will generally not apply to the cost of a freight transportation service performed on or after July 1, 2010 if the service is part of a continuous freight movement of goods that begins before July 2010.

For further information on the HST and proposed transitional rules, see the following:
Canada Revenue Agency

Ontario Ministry of Revenue

Information provided by taxtips.ca