HST on Goods: Conflict for B2C

Posted on August 22, 2011 by Cyndee Todgham Cherniak

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.

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A History Lesson Regarding a Failed HST Attempt

Posted on August 15, 2010 by Cyndee Todgham Cherniak

On February 20, 1991, then Finance Minister Michael Wilson announced in Department of Finance press release 91-023 that the Federal Government of Canada and the Government of Saskatchewan had signed a Memorandum of Understanding which provides for the harmonization of the provincial sales tax with the very new goods and services tax ("HST").  I have a copy of this press release from Carswell's Canada GST Service (pages R687-694 in the "Historical" binder), but have not received permission yet to attach the photocopy.  The harmonization was to occur on January 1, 1992; but never did.

At the time of the press release in 1991, Grant Devine was the premier of Saskatchewan.  A few months later he had been voted out of office and Roy Romanow was the premier of Saskatchewan. During the election campaign, the proposed tax harmonization was a hot topic and public opposition was fierce.  Due to the public opposition to the sales tax harmonization plan, Premier Roy Romanow scrapped the sales tax harmonization plans and to this day Saskatchewan does not have an HST.  Harmonization legislation was not drafted (or should I say completed and released publicly) by the federal Department of Finance until 1997 when Nova Scotia, New Brunswick and Newfoundland/Labrador decided to implement the HST.

Former Premier Grant Devine became the Premier of Saskatchewan in the 1982 after his Progressive Conservative Party won the most seats (55 of 64 seats) in the provincial election.  His government was re-elected in 1986.  During the 1991 election, the Progressive Conservatives won only 10 of 66 seats and both the Devine PC government and the HST were history.  In 2004, Grant Devine sought to enter the federal political arena as a candidate, but was not accepted by the federal PC Party. 

In 1991, the New Democratic party won the election in Saskatchewan.  Roy Romanow became premier and held that position through two elections (1991-2001). Former Premier Lorne Calvert replaced Roy Romanow as NDP leader and premier of Saskatchewan (2001-2007).  Calvert and his government were defeated in 2007 by the Saskatchewan Party and Brad Wall became premier (2007 to present).  The Saskatchewan Party is a coalition of members of the Saskatchewan PC and Liberal parties, but is not the result of a merger.  Technically, the Saskatchewan PC party still exists, but is dormant so to speak.  It can, therefore, be said that the PC party in Saskatchewan did not recover after the failed HST attempt.

Back to the February 20, 1991 Department of Finance press release - Michael Wilson's press release and the backgrounder included statements about how the harmonized sales tax would be better for businesses.  It included statements about how single tax administration would result in economic efficiency and cost savings to businesses.  The people of Saskatchewan did not accept these statements as evidenced by the thrashing the initiators of the HST experienced (both federal and provincial PC parties) during the post announcement elections.

If one considers the Saskatchewan experience and then looks at the anti-HST movement in British Columbia, one should be able to see more clearly how the people can have a strong voice.

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