Ontario Government and BC Government May Not Follow HST Transition Rules & Give Selves Sale Tax Holiday
The Canada Revenue Agency (CRA) has issued GST/HST Info Sheet GI-073 "Ontario and British Columbia: Transition to the Harmonized Sales Tax - Payment of the GST/HST by Ontario and B.C. Government Entities (May 2010) and the examples provided put the government entities in Appendix A outside the HST transition rules. So, I have to warn suppliers to the Appendix A government entities to be careful because CRA auditors may try to apply the transition rules. I find it funny and sad that the Governments do not follow their own transition rules to save the HST (when businesses and consumers do not get the same breaks).
Example 3 in GI 073 provides as follows:
In may 2010, an Ontario ministry, which is listed on schedule A to the RTA, orders and pays for furniture, but the furniture will not be delivered and ownership will not be transferred to the Ontario ministry until August 2010. The furniture is acquired in the name of the Province and the Ontario ministry provides a Crown funds exemption request or certification clause to the supplier.
Because the Ontario ministry is listed on Schedule A to the RTA, and the consideration for the supply of the furniture is paid before July 1, 2010, the Ontario ministry will continue to claim an exemption from GST/HST. Therefore, the supplier does not charge GST/HST on the consideration for the supply of the furniture to the Ontario ministry. In this case, the supplier may accept the Ontario ministry's Crown funds exemption request or certification clause requesting relief from both the GST and the HST as the consideration for the supply was paid before July 1, 2010.
The HST transition rules applicable to everyone else were released on October 14, 2009. The HST transition rule for tangible personal property (goods) provided that if tangible personal property was purchased after May 1, 2010 and consideration was paid between May 1, 2010 and July 1, 2010 and the tangible personal property was delivered on or after July 1, 2010, HST would be applicable. To save the HST, the tangible personal property would have to be purchased before May 1, 2010 and the consideration paid before May 1, 2010. As a result, the Ontario and B.C. Governments have beneficial treatment not available to others.
The other interesting issue relating to Example 3 is that Ontario retail sales tax or B.C. social service tax would be payable if the furniture had been delivered before July 1, 2010. So, it looks like (according to the CRA's GI-073) the rules applicable to Ontario and B.C. provide the Government entities with a tax holiday between May 1, 2010 and June 30, 2010. How is that fair?
All I can say is for suppliers to the Ontario Government and BC Government to beware. This does not seem correct.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
