Ontario Has Not Updated Its Precedent Assessment Letter
Ontario businesses (primarily vendors) are being audited for Ontario retail sales tax (ORST) compliance as the ORST program is being wound down. The auditors move to the Canada Revenue Agency (CRA) in March 2012.
When business is audited they receive an audit summary setting out the auditor's findings and the proposed assessment amount. As the time of the assessment, they receive (1) an assessment letter and (2) the assessment (often sent separately and sometimes of different days). result The assessment letter continues to state (incorrectly):
"Failure to comply with the above-noted requirements of the Retail Sales Tax Act in the future may in the application of a 25% penalty under section 20(7) and/or 20(4) under the Act."
The Ministry of Revenue have forgotten to tell the auditors that vendors must now comply with the provisions of the Excise Tax Act (Canada) and not the Retail Sales Tax Act (Ontario) (with the exception of insurance companies and buyers of used cars).
If a vendor is audited by the Ontario Ministry of Revenue and receives an assessment, it does not mean that they now (after July 1, 2010) must charge ORST or remit ORST in respect of own use or pay ORST on purchases of tangible personal property and taxable services. Vendors are not required to charge 13% HST and 8% ORST as the assessment letters suggest.
Failure to update the assessment letters may lead to confusion and unjust enrichment of Ontario.
Cyndee Todgham Cherniak is the founding lawyer of LexSage, a boutique international trade law and sales tax firm in Toronto,
