The Music Industry is Blogging About HST
I came across an interesting post by Music Central News about the implementation of HST. What is interesting about this post to an HST specialist is:
1) That they have attended GST/HST seminars;
2) They are communicating to their audience the HST as they understand them; and
3) They are concerned about the HST having an impact on an increasing underground economy.
However, I am concerned about such posts - Unfortunately, the information is not prestinely accurate. They write:
If you have already booked with us for a date after July 1, 2010 and paperwork has been sent out with just the G.S.T. then you will continue to pay just the G.S.T.. An advantage for booking early!
Actually, the transition rule for services to be performed after July 1, 2010 requires (1) the contract to be entered into before May 1, 2010 and (2) payment of consideration before May 1, 2010. If the payment is received after May 1, 2010, then the services performed after July 1, 2010 would be subject to HST. If the contract is not signed and returned before May 1, 2010 (it is not sufficient for the quotation to be mailed), then the services performed after July 1, 2010 would be subject to HST. A deposit is not considered to be consideration for the performance of a service. A deposit is treated as consideration for the supply at the moment in time that it is allocated to the supply. Also, the amount owing under the contract must be paid in full before May 1, 2010 to satisfy the HST transition rule.
Another unfortunate issue is the underground economy. Just because a person does not charge HST does not mean that they are bad and part of the underground economy. If a small supplier does not make taxable sales in excess of $30,000 per year, they are not required to register for GST/HST purposes and do not have to charge GST/HST. A business cannot get around the small supplier threshold of $30,000 by having more than one business - the threshold is calculated based on the related businesses. If a business does not register for GST/HST purposes, they will not be entitled to recover input tax credits regarding the GST/HST paid on business inputs.
My last point, and I really hate to bring this up when the Music Central news is trying hard to be helpful, highlights the problem with prepayments of deposits. When amounts are paid for services before they are delivered, it is possible that the services will not be provided. Is the risk of non-performance of services worth saving the 8% HST. I would rather have control over 100% the money for the services.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
Hi Cyndee,
Thank you for taking time to clarify points on a topic that the government once again allows to be foggy at best.
Knowing Mr. Aitken personally I have talked to him specifically about this topic. His research was in depth including a 45 minute discussion with Revenue Canada employees.
My accountant's advice was that the event's date was key to HST. Therefore, any service performed after July 1 would incur HST. Had your information been more readily know, I'm sure industries such as ours, would have promoted it extensively.