HST on Goods: Conflict for B2C
Store owners, artists, and others who sell goods often have difficult discussions with their customers about the addition of harmonized sales tax ("HST") to the invoice price. If an artist in Alberta sells a painting to a buyer at their gallery in Alberta and the buyer leaves the gallery with the painting, then they charge 5% goods and services tax ("GST"). If an artist in Alberta sells a painting to a buyer in Alberta and is asked to ship that painting to Ontario, the artist must charge 13% HST (Ontario's rate) on the painting and the shipping and handling costs.
The retailer in Ontario has similar issues (albeit the reverse problem). If an artist in Ontario sells a painting in Ontario and the buyer leaves the gallery with the painting, the artist must charge 13% HST. If an artist in Ontario sells a painting to a buyer in Ontario and ships the painting to Alberta, the artist must charge 5% GST only (not 13% HST) on the painting and the shipping and handling.
You can substitute the word "artist" for "retailer" and "painting" for "goods". Retailers have similar issues. Customers often respond negatively about the lack of "customer service". Customers often blame the messenger retailers who are forced to charge sales tax. If the buyer in Ontario wants to leave the store in Ontario with the goods, it will cost them more in tax. If the buyer wants to reduce the risk of never getting their purchased good (painting) or risk damage or loss during shipping, there is a perceived added cost (the HST).
One seller of a puppy commented to me that a customer threatened to call the police on the basis that the retailer was holding the puppy hostage until the HST was paid in Ontario. In this case, the buyer was from the United States and knew that he could not get the HST back if he took the puppy home in his car across the border. He also did not want the puppy sent by courier (understandably so). It cost more in gas than the HST for the breeder to drive the puppy to the border and give the puppy to the buyer before he left Canada. There was no solution that worked perfectly for all.
An artist in Alberta also has commented to me that she has many difficult conversations with buyers. The buyers often wrongly argue that the persons in Alberta are not supposed to be charging HST. The reality is that any registrant for GST purposes in Alberta may have to charge HST in certain situations and risk an assessment by the Canada Revenue Agency if they do not charge, collect and remit HST when required.
Retailers in Alberta, Saskatchewan, Manitoba, Quebec and Prince Edward Island (and the Northwest Territories, Yukon and Nunavut) are bound to follow Canada's federal laws. HST and GST is imposed under a federal law. The reality is that they may have to charge HST and must know the HST place of supply rules. The serious reality is that buyers will, from time to time, argue with the retailer an walk away from the sale. The HST will kill some transactions.
The same holds true for retailers in Ontairo, British Columbia, New Brunswick, Nova Scotia and Newfoundland/Labrador - I mention these provinces separately as they seem to be coping better.
The more retailers understand the HST rules (in any province or territory), the easier it will be to come up with public relations statements to win the customers heart in spite of the HST.
Cyndee Todgham Cherniak is the founding lawyer of LexSage, a boutique international trade law and sales tax firm in Toronto,
