Reminder: May 1, 2010 May Be Your Official Start of HST Collection/Paying Obligations
This may be your last week of harmonized sales tax (HST) freedom. Sorry to be the messenger of the news.
July 1 may be the "official" implementation date of HST in Ontario/British Columbia; however, under the transition rules, all current GST registrants (wherever they are located) currently doing business in Ontario/BC, may be required to collect the 13% HST starting on May 1, 2010.
Rule 1: If a customer purchases goods after May 1, 2010 AND pays for the goods after May 1, 2010 AND the goods are delivered after July 1, 2010, HST will be collectible on that sale even if the money is paid before July 1, 2010. For example, a consumer purchases a custom sofa on May 2, 2010. The delivery date for the sofa is July 23, 2010. HST will be collectible and payable on the amounts paid for the sofa after May 1, 2010 due to the delivery date of the goods.
Rule 2: A client purchases services after May 1, 2010 AND pays for the services after May 1, 2010 AND the services are provided after July 1, 2010, HST will be collectible on that sale even if the money is paid before July 1, 2010. For example, a client contracts with a painter who is really busy due to the incoming HST. He cannot paint the rooms in the house until August 2010. Even if the client pays the painter before July 1, 2010, the supply is subject to HST because the services will be performed after July 1, 2010.
Exception to Rule 2: HST will not be payable by other clients of the painter who starts to provide the services before July 1, 2010 and is 90% complete as of July 1, 2010.
Rule #3: If a lessor (supplier) leases equipment to a lessee (recipient) starting on May 1, 2010 for 12 months and is paid in full on May 30, 2010 for the 12 month lease period, GST and HST will be collectible and payable on 10 of the monthly lease installments. GST and Ontario retail sales tax (or British Columbia Social Service tax) would be collectible and payable for 2 (May and June) of the 12 months. Assumption is that place of supply rules puts the equipment in Ontario or BC.
If a supplier collects HST in May or June 2010, they do not remit it until their first GST/HST return after July 1, 2010. In other words, this is the one time that it is okay to keep the tax collected for a little longer than your next return. The reason why the Ontario and British Columbia do not want supplies to remit the HST in May or June is that the provinces will not get the money. The HST will be characterized and GST in the computer systems. That being said, all GST, ORST and BCSST must be remitted on time.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
