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

If one reads the Ontario - Canada Comprehensive Integrated Tax Coordination Agreement (the "HST Agreement") signed by Minister Dwight Duncan, it is clear that there is more room for point of sale (POS) rebates.  Point of sales rebate means the 8% provincial component of the HST is not payable.

Article 3 of Annex B of the HST Agreement provides:

Where the Province advises Canada of its desire to designate particular property or services as items eligible for a PVAT-POS Rebate in respect of the Province effective on and from a particular day, the Parties agree that the Province will be permitted to designate those property and services as such items if the total value, as determined by Finance (Canada) in consultation with the Province, of all such items that would be eligible for a PVAT-POS Rebate in respect of the Province immediately after the particular day (including the particular property or services) and that were supplied in the Province during the last calendar year for which the GST Base in respect of the Province has been determined, in accordance with Annex “A”, does not exceed 5% of that GST Base. 
 

What this means is that Ontario may grant point of sale rebates (called "POS") in respect of the provincial component of the HST (called "PVAT").  “GST Base”  is defined in Annex B to mean "in respect of the Province for a calendar year means the estimated tax base under the harmonized sales taxes for the Province in the calendar year, as determined by Finance (Canada) pursuant to Formula D of Annex “A” (referred to in that Annex as “PROVBASEt”)."  I won't complicate things further by going through Formula D.

Ontario granted a very small number of POS rebates:

• books
• children’s clothing and footwear
• children’s diapers
• children’s car seats and car booster seats
• feminine hygiene products
• printed newspapers
• prepared food and beverages sold for a total consideration of $4 or less

There is a lot of room for more POS rebates.  Tim Hudak has promised if elected October 6th to negotiate a POS rebate in respect of hydro and home heating.  British Columbia negotiated that one from the very beginning.

In this blog, I have the luxury of making my own recommendations.  My first recommendation would be for a POS rebate on healthy prepared meals such as salads (the salads I buy cost more than $4.00).  I also think that bicycles and accessories should not be subject to PVAT (there was an exemption under the Retail Sales Tax).  To promote Ontario culture, family outings and tourism, I think the former retail sales tax exemption for admissions to small theaters should reappear as a POS rebate.  In my view, vitamins should be the subject of a POS rebate. 

In addition, Ontario should determine whether more transactions involving hospitals, nursing homes health care and education can be the subject of a POS rebate.  The HST on these items that require government funding should be reviewed because it is an area of government spending that can be reduced without negatively affecting service.

I could go on, but I will receive many negative partisan comments if I do.  As a taxpayer who knows about HST, I feel that more POS rebates and relief could have been granted from the beginning.  The McGuinty Government chose what POS rebates to grant or chose not to grant many rebates.  Given the insignificant coverage of the POS rebates in the current CITCA, they chose tax revenues over using their POS bandwith.

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On July 1, 2010, fire trucks became subject to HST in Ontario.  Previously fire trucks were not subject to Ontario retail sales tax (ORST).  Paragraph 7(1)23 of the Retail Sales Tax Act (Ontario) exempted "fire fighting vehicles, as defined by the Minister, when purchased at a price of more than $1000 per vehicle for the exclusive use of a municipality, university, public hospital, local services board or volunteer group, and repairs for such vehicles."  As a result, the tax rate increased by 8%.

Many of the bodies that purchase fire trucks are engaged in exempt activities.  This means that they do not recover the 8% HST/PVAT by way of an input tax credit.  many of the bodies that purchase fire trucks are entitled to a partial MUSH sector rebate.  However, none get 100% of the HST/PVAT back.  This means fire trucks are more expensive due to unrecoverable HST.

With provincial/municipal/university/hospital and other budgets so constrained, I sincerely hope that McGuinty's decision to collect more tax on fire trucks does not cost any Ontarian their life.

By the way, I disagree with McGuinty's decision to impose HST on fire trucks.  I support our hard working fire men & women who bravely put their lives on the line for us.  Let me know if you agree with me and let McGuinty know that you disagree with his decision.

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Ontario retail sales tax ("ORST") was not imposed on electricity and residential heating fuels.  ORST was imposed on "tangible personal property", which was defined in the Retail Sales Tax Act (Ontario) (ORSTA) as "personal property that can be seen, weighed, measured, felt or touched, or that is in any way perceptible to the senses, and includes ... natural gas and manufactured gas." 

To the extent that the following forms of residential heating were captured by the definition of "tangible personal property, the ORSTA contained a specific exclusion to ensure they were not subject to ORST:

• Gasoline (because it was taxed and remains taxed under the Gasoline Tax Act (Ontario);
• Fuel (because it was taxed and remains taxed under the Fuel Tax Act (Ontario);
• Fuel oil (because it was taxed and remains taxed under the Fuel Tax Act (Ontario);
• Coal;
• Coke (not the soda pop variety);
• Wood;
• Natural gas and manufactured gas (as defined by the Minister);
• natural water (including ice and steam);
• Electricity of all purposes; and
• Ethanol or methanol that is sold and purchased as fuel to generate power by internal combustion.

When HST was implemented in Ontario on July 1, 2010, these exemptions disappeared and the list above became subject to HST.  The increase is tax payable by consumers was the 8% PVAT rate.

What some people do not realize is that the fuel tax and gasoline tax, to the extent it applied before July 1, 2010, continues to apply.  In other words, the amount of tax payable increased because the McGuinty Government did not repeal the Fuel Tax Act or the Gasoline Tax Act.

In addition, HST will apply to services provided by an energy supplier and administrative charges, such as:

• connection or disconnection of a service or equipment,
• installations, inspection, testing, maintenance or repairs,\relocation or upgrades of a service or equipment,
• analysis of the use of an energy product;
• activation or cancellation of an account,
• late payments,
• interest,
• returned or dishonoured payments,
• method of payment,
• account adjustments,
• account information,
• franchise fees; and
• Equipment-related charges, including charges relating to equipment purchased or leased by the person acquiring the energy product.

So, if you are wondering what changed - there you have it.  Premier McGuinty had the option on ensuring that you did not pay more on essentials such as electricity and residential heating - he made a choice not to give consumers a break.  Premier McGuinty and Minister Dwight Duncan had (has) the option in the Comprehensive Integrated Tax Cooperation Agreement (the agreement between Ontario and the Government of Canada re harmonization) to select point of sale rebates (meaning the supplier does not have to collect the PVAT portion of the HST).  McGuinty and Duncan decided Ontarians can and will pay HST on electricity and home heating.

Premier Campbell, who is resigning in part because of HST did agree to a form point of sale rebate (called a Residential Energy Credit) for residential electricity and home heating. Energy products qualifying for the Residential Energy Credit are electricity, natural gas, propane, heating oil (including bio diesel or similar renewable fuel), kerosene, heat and steam.

These are the facts folks ... Please do not shoot the messenger ... use this information instead.

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