Harmonized sales tax ("HST") is complicated. I get asked easy and hard questions every day. What I am seeing is that many business owners want to be correct on all maters HST, but do not ask the right questions. A business owner must ask:
- What am I supplying?
- Am I making a single or multiple supply?
Many business owners start with a different question. Unfortunately, they do not take sufficient time to analyze what they actually supply (or may be seen by a Canada Revenue Agency Auditor to supply) as a first step. BUT, if you do not know what it is that you are supplying, then you may not property apply other HST rules (such as the place of supply or transition rules).
For example 1: A number of years ago, I had a client tell me that they license computer programs. I asked to see the licenses that allowed users to use their computer programs. They looked at me blankly and said none of their customers had signed a license agreement. When we dug into what they actually supplied, they ran a web-site that allowed persons to access information via the Internet. They had developed a computer program for their own use in order to run their web-site and process information received from Internet users. They never gave the Internet users the ability to download this computer program. The actual deliverable was a list of names and useful information that the Internet user could then use to contact one of the supplied names to acquire an unrelated service from a third party.
This client thought that they provided tangible personal property when in fact they performed a service or provided intangible personal property.
For example 2: Another client is an interior designer. The interior designer said she provided interior design services. However, for many clients, the interior designer bought and resold paint, tiles, wall paper, furniture, etc. and chargde a 15%-25% mark-up. The interior designer actually provided tangible personal property and services.
For example 3: Another client is an exterminator (of pests). The exterminator thought he performed a valuable service. In the world of HST, he actually performed a service in respect of real property.
The list of examples could go on and on. My point is that unless you look at the question of "What Am I Supplying?" from an HST perspective, you may not apply the other HST rules properly. There are many other HST rules to apply properly.