Ontario Retail Sales Tax Audits
Despite harmonization, Ontario retail sales tax (ORST) continues to be important because auditors are verifying compliance with ORST laws occurred prior to July 1, 2010. The ORST rate was 8% and the normal audit period is 4 years (but can be longer for sales tax collected and not remitted and any misrepresentation attributable to neglect, carelessness or willful default). As a result ,the assessment period remains open for those who were in the ORST system prior to July 1, 2010 (or should have been in the system).
It is a MUST to resolve as many sales tax issues with the auditor during the audit because it gets REALLY expensive to resolve issues after the audit is finalized AND it takes a REALLY long time.
First, it is important to know that an assessed taxpayer (including assessed vendors) must pay 100% of the amount assessed or post security for 100% of the amount assessed and then fight to get the money back.
Second, at the present time, if you have to file a notice of objection (an informal appeal), it takes OVER 19 months for the objection to be assigned to an officer.
Third, after the objection gets assigned to an appeals officer, they will do everything in their power to drag the process and cause the taxpayer to spend a lot of money on lawyers. The Government's strategy is to get the taxpayer to walk away from the collected assessed amount.
Fourth, it regularly takes years for the appeals officer to make a determination and in over 80% of the time, the appeals officer will confirm the assessment stating such things as "I am not a lawyer and do not know the law", I do not know anything about contract law", "If you do not promise to give up your right to an appeal, I will confirm the entire amount", etc.).
Fifth, the Ministry of the Attorney General's office, which handles formal appeals to the Ontario Superior Court of Justice, does not have lawyers dedicated to Ontario retail sales tax files. It is not their top priority to move sales tax cases to Court.
In my experience, every attempt is made to extend the length of time the dispute is ongoing because the Government of Ontario has the taxpayers' money.
If you are being audited by the Ministry of Revenue, contact a lawyer to help at the time of the audit. Otherwise, you will be dealing with the problem of an assessment for a long time. Please contact Cyndee Todgham Cherniak (416-760-8999) if you require assistance.
Cyndee Todgham Cherniak is counsel to and in affiliation with the International Trade Law and the Tax Law (Commodity Tax
