The HST Blog : Canada Harmonized Sales Tax Lawyer Cyndee Todgham Cherniak for Assessments, PST & RST Issues in Ontario, British Columbia & Quebec

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The Canada Revenue Agency (CRA) has made available a WebCast about the completion of the new electronic GST/HST return.  While the WebCast will not win an academy award for best short film or best foreign film, it is worth watching (it is longer than I expected).  If you cannot bear watching the WebCast, there is a transcript.

The WebCast gives important information to registrants for GST (and HST) purposes and others who must file GST/HST Returns.  The WebCast includes important information for builders of real property  and other businesses (anyone with sales over $1.5 Million in annual taxable sales (including exports and other zero-rated supplies)) who must file GST/HST Returns electronically starting with their July 2010 GST/HST Return or the GST/HST Return for the reporting period including July 1, 2010.   The July 1, 2010 date is important because Ontario and British Columbia want to have electronic records on how much HST they should be expecting to receive from Ottawa.

When planning to watch the WebCast, please  bring some healthy popcorn to watch the video as part of the video does explain how exactly you are to complete the GST/HST Return on a line by line basis.

At the present time, there are four different electronic filing options, as follows:

• GST/HST NETFILE
• GST/HST TELEFILE
• GST/HST EDI filing and remitting, and
• Internet File Transfer, and we will review in detail the GST/HST NETFILE option.

For those who have never filed electronically using NETFILE go to www.cra.gc.ca/gsthst-netfile to get signed up. Before you file, you will need your 15 digit Business Number, your Reporting Period dates and your four digit access code.

Watching the WebCast will give businesses who must file in this manner important ideas about how to set up their internal records and reporting systems to enable quick completion of the electronic GST/HST Return.  For example, the manner in which restricted input tax credits are required to be reported would suggest separate internal accounting records (General Ledger) accounts for Ontario, British Columbia, etc.  This would suggest that invoices should clearly indicate the place of the supply (e.g., write on the invoice "The Place of Supply is Ontario and, therefore the applicable GST/HST rate is 13%").  Taking such steps will make it easier for the auditors (and your memories) at the time of an audit.

Based on my discussions with some larger businesses who are being asked to file using the GST/HST NETFILE method, some businesses actually are not able to use the CRA's preferred electronic filing method due to their computer systems.

Another important issue that has arisen is payment.  Non-resident companies like the idea of electronic filing.  However, they do not have a Canadian funds bank account.  To open a Canadian funds bank account, they need to have an extra-provincial registration in a Canadian province of territory for doing business in that jurisdiction.  It is not necessary to have a permanent establishment in the province or territory to open a bank account. However, the CRA looks at the location of bank accounts in its consideration of residency/permanent establishments.  As a result, there is a problem that needs to be resolved to facilitate the quick payment of GST/HST obligations without changing ones characterization for other tax purposes.  I should note that it is not necessary to make payments of GST/HST Returns electronically and the old fashioned method of sending a cheque or wire transfer remains acceptable for now.