Taxpayer Interest And Penalty Relief: How Can A Taxpayer Get Some Relief?

Canadian taxpayers are entitled to apply to the Canada Revenue Agency for taxpayer relief of penalties and interest.  All that is required is for a taxpayer who has been assessed to complete and submit an RC4288 form "Request for Taxpayer Relief - Cancel or Waive Penalties and Interest".  This form can be used for goods and services tax ("GST") and harmonized sales tax ("HST") relief in addition to income tax.

The form is relatively simple - however, the devil is in the details.  Section 2 is very important and any taxpayer seeking a significant amount of relief should take care in writing the reasons for the request for relief.  We often prepare a separate document providing the facts and reasons why relief should be granted - we do not limit the written communication to the form.  We also attach relevant documents to show transparency and openness.

It is important to understand that relief is not guaranteed.  While the CRA has broad discretion to grant relief, they also have broad discretion to deny relief. The CRA provides limited information about when they will grant penalty and interest relief.  The CRA indicates that the Minister of National Revenue may grant relief from penalty or interest when the following types of situations prevent a taxpayer from meeting their tax obligations:

  • extraordinary circumstances:  Penalties or interest may be cancelled or waived in whole or in part when they result from circumstances beyond a taxpayer's control. Extraordinary circumstances that may have prevented a taxpayer from making a payment when due, filing a return on time, or otherwise complying with a tax obligation include, but are not limited to, the following examples:
    • natural or human-made disasters, such as a flood or fire;
    • civil disturbances or disruptions in services, such as a postal strike;
    • serious illness or accident; and
    • serious emotional or mental distress, such as death in the immediate family;
  • actions of the Canada Revenue Agency (CRA): The CRA may also cancel or waive penalties or interest when they result primarily from CRA actions, including:
    • processing delays that result in taxpayers not being informed, within a reasonable time, that an amount was owing;
    • errors in CRA material which led a taxpayer to file a return or make a payment based on incorrect information;
    • incorrect information provided to a taxpayer by the CRA;
    • errors in processing;
    • delays in providing information, resulting in taxpayers not being able to meet their tax obligations in a timely manner; and
    • undue delays in resolving an objection or an appeal, or in completing an audit;
  • inability to pay or financial hardship:  The CRA may, in circumstances where there is a confirmed inability to pay amounts owing, consider waiving or cancelling interest in whole or in part to enable taxpayers to pay their account. For example, this could occur when:
    • a collection has been suspended because of an inability to pay caused by the loss of employment and the taxpayer is experiencing financial hardship;
    • a taxpayer is unable to conclude a payment arrangement because the interest charges represent a significant portion of the payments; or
    • payment of the accumulated interest would cause a prolonged inability to provide basic necessities (financial hardship) such as food, medical help, transportation, or shelter; consideration may be given to cancelling all or part of the total accumulated interest; and
  • other circumstances: The CRA may also grant relief if a taxpayer's circumstances do not fall within the situations described above.

The CRA is working to improve its procedures for dealing with Requests for Taxpayer Relief. When a completed form is filed with the supporting documentation, the CRA should send a letter to the requester acknowledging receipt of the Request for Taxpayer Relief.  The file should be assigned to a CRA officer and the taxpayer should receive requests for relevant documentation (unless a full set of relevant documents is provided with the Request for Taxpayer Relief).

If the taxpayer gets a decision that is not favourable - it happens often - then there is the ability to request an impartial review of the CRA officer's decision by the CRA (not the same CRA officer who rejected the request).

If the review procedure ends in a rejection of the requested relief, it is possible to seek a review by the Federal Court of Appeal by way of a judicial review.  However, judicial reviews often are an expensive legal procedure and can cost tens of thousands of dollars (even hundreds of thousands of dollars in some cases depending on the complexity of the issues). There have been judicial review applications filed and the Federal Court of Appeal has in some cases sided with the taxpayer.

I will be honest with you - the Request for Taxpayer Relief Program can be frustrating for persons seeking relief. That does not mean it is not worth the effort and one should not try. Just know that you may feel like you are still stuck in the mud while pursuing a process that may take time.

For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.  We have many useful articles about tax audits under Free Information - Sales Tax, Harmonized Sales Tax (HST) and Goods and Services Tax (GST) Articles.

15 Stages Of A Canada Revenue Agency GST/HST Audit

If you have never been audited before, you probably have no idea what to expect.  Most audits follow the same 15 stages (more or less).  On the taxpayer's side of things, each stage is stressful.

  1. CRA Selection Process:  The taxpayer usually has no involvement in this process.  It all happens behind the scenes and the taxpayer can only guess why their name was selected. Sometimes the taxpayer is randomly selected.  Sometimes the taxpayer is selected as a result of the industry segment in which they operate.  Sometimes the taxpayer is selected because of something in a filing with the CRA.  Sometimes the taxpayer is selected because of a tip made to the CRA.
  2. The Audit Letter: The taxpayer receives a letter from the CRA notifying them that they are to be audited. Normally, the taxpayer is asked to contact the CRA auditor.  However, sometimes the auditor just shows up at the business premises.
  3. The CRA letter requesting certain documents:  Usually the CRA auditor will send to the taxpayer a letter indicating what documents need to be provided before the initial meeting at the taxpayer's premises or what documents must be available for the first day of the audit.
  4. Initial Meeting:  If the audit occurs at the taxpayer's premises, the auditor will have a meeting at the start of the audit.  The auditor explains what is expected during the audit.  The taxpayer should also communicate to the auditor what is expected.  The taxpayer may indicate that the auditor must deal with a specific person so that the entire organization does not end up working for the auditor.
  5. Fieldwork:  The on-site audit is the fieldwork stage.  The fieldwork can take place over a few days or over a lengthy period of time.
  6. Office work: Usually the auditor will take information back to the CRA offices and work on the audit from the CRA premises.
  7. Follow-up questions: It is common for the CRA auditor to contact the taxpayer after the fieldwork stage of the audit. Sometimes additional documents are requested.  Sometimes additional questions are asked.
  8. Preliminary Report: The CRA auditor will prepare a proposal and send it to the taxpayer for comment.  Usually a proposed assessment number is provided to the taxpayer.
  9. Response Letter: The taxpayer has an opportunity to change the minds of the CRA.  This is the best opportunity to stop an incorrect assessment from being issued.
  10. Notice of Re-assessment: The CRA auditor sends to the taxpayer the Notice of Reassessment setting out how much is being assessed.
  11. CRA Collections: As of the date of the Notice of Re-assessment, a debt is due to Her Majesty.  CRA Collections may start collection activities immediately after the Notice of Re-Assessment is issued.
  12. Notice of Objection: If a taxpayer disagrees with a Notice of Re-Assessment, the taxpayer can file a Notice of Objection.
  13. Objection: The taxpayer will communicate with a CRA Appeals Officer and the re-assessment will either be confirmed, amended to reversed.
  14. Notice of Appeal: Assuming that not all the issues are addressed in the objection stage, a taxpayer may file an appeal with the Tax Court of Canada.
  15. Day in Tax Court: A taxpayer will have their day(s) in the Tax Court of Canada if the appeal is not settled.  A Tax Court judge will listen to the parties and render a judgement.

For more information, please contact Cyndee Todgham Cherniak at 416-307-4168 or at cyndee@lexsage.com.  We have many useful articles about tax audits under Free Information - Sales Tax, Harmonized Sales Tax (HST) and Goods and Services Tax (GST) Articles.

One Of The Common Objection Mistakes - Missing The Deadline

There have been many times that a potential client contacts me (or any tax lawyer) to discuss filing a notice of objection to challenge a notice of assessment from the Canada Revenue Agency ("CRA"). The potential client seems to have a good legal position.  Then, I ask for the notice of assessment date and --- yikes --- it is more than 3 months ago. 

The deadline to file a GST/HST notice of assessment is 90 days from the date on the notice of assessment.  Three months is a short amount of time that seems to tick by quickly.  Some of that time passes while the notice of assessment is in the mail.  Some of the time is spent looking for a tax lawyer.  Unfortunately, some of the time is spent avoiding the issue of a GST/HST assessment.

If a taxpayer misses the 90 day deadline, is there any chance to still file a notice of objection?  The answer is that it depends..  Section 303 of the Excise Tax Act gives taxpayers an opportunity to apply to the Minister for an extension of time to file a notice of objection within one year of the expiration of the 90 days deadline.  In the application for an extension of time, the taxpayer must:

1) demonstrate that within the 90 day deadline for the notice of objection the taxpayer was unable to act or give instructions to a representative to file a notice of objection OR the taxpayer had a bona fide intention to object; and

2) give good reasons why the Minister should grant the application for an extension of time.

It is not a sure thing that the Minister will grant an extension of time to file a notice of objection.  We have been successful in receiving an extension of time when a client did not receive the notice of assessment, where the client asked for information from the auditor and was waiting for the information, where the client continues to discuss the audit file with the auditor or a supervisor after the date of the notice of assessment (and the T2020 report has recorded this contact), and when the client has communicated with the CRA about a desire to object.

It is important to note that while a telephone call does not constitute a notice of objection, telephone calls can evidence a desire to object.  That being said, if the notice of assessment was issued in 2013 and you contact a lawyer in 2016, the 90 days plus 1 year period for seeking an extension of time will have expired. In this scenario, there is no opportunity to file a notice of objection late.

If the Minister rejects an extension of time request, the taxpayer may appeal to the Tax Court of Canada to have the extension of time reconsidered (see section 304 of the Excise Tax Act). The Tax Court of Canada may dismiss the request or grant the request. The taxpayer must be able to present the Tax Cort of Canada with evidence that they intended to object to the assessment and that it would be just and equitable to grant the extension of time to file the notice of objection.  The Tax Court will not be moved by arguments that the taxpayer forgot about the deadline.

How To Find Out What Is In The Canada Revenue Agency's Files About Your Audit

Wouldn't you like to know what is in the Canada Revenue Agency's ("CRA") files concerning your GST/HST audit? This information is very valuable in finding out where the CRA made a mistake or what is the basis for the misunderstanding about your taxes.  We recommend obtaining this information as soon as possible after an assessment is issued AND after an appeals officer makes a decision to confirm an assessment.  The information in your audit file may help you prepare a notice of objection or notice of appeal.  The information in your CRA files may also be very useful during an examination for discovery. During the examination for discovery, your lawyer may use the information to catch the auditor or appeals officer (the usual deponents for the CRA) in a misstatement.  The examination for discovery process sometimes leads to settlements. Most importantly, the information in the auditors own files may be used to contradict assumptions made in making the assessment.

You may obtain information in your CRA files by filing an Access to Information and Privacy (ATIP) request.  The ATIP requester must complete a Form RC378.  Where you may need the assistance of a tax lawyer is to ensure you are asking for the correct information.  If you have no idea for what to ask (e.g., the T2020 form completed by the CRA officer each time she/he spoke to you or a representative or someone in the CRA), you may miss requesting useful information.  This is the most common problem is not knowing what would be in the CRA's audit file.

The filing fee is only $CDN 5.00.

The CRA posts limited information on the Canada Revenue Agency web-site about making an ATIP request - see How to access information at the CRA.

The next problem that arises is that the CRA may withhold information.  There is the right of appeal should the CRA withhold certain information. This will be the subject of a subsequent blog post.

Based on our experience, the ATIP process often results in information being provided that an auditor will not often send to the taxpayer.  For example, if the auditor obtained an appraisal from the CRA, Real Property Appraisal Division, the auditor is often told not to give that document to the taxpayer.  The ATIP process usually results in the release of the appraisal.  Similar,y the auditor often will not share internal emails.  The ATIP process usually results in the release of the internal emails.  At the end of an audit, the auditor prepares a memo for the team leader/supervisor.  The ATIP process usually results in the release of the Auditor's file memo(s).

Based on our experience, it is important to file an ATIP request.  It is a small price to pay to possibly win the tax argument.  It is a small price to pay to potentially save the expense of a hearing at the Tax Court of Canada and years of fighting the tax dispute.  Finally, wouldn't you like to know what the auditor wrote in your file?

If you require assistance, please contact Cyndee Todgham Cherniak at 416-307-4168 or cyndee@lexsage.com.  We offer flat rates to file ATIP requests.

Canadian Sales Tax Rates (as at January 1, 2016)

Canadian Sales Tax Rates Chart
As at January 1, 2016

 

Province/Territory

Provincial Sales Tax

GST/HST Rate

GST Included in PST Tax Base

Combined Rate

British Columbia

7%
 

5%
 

N/A

12%

Alberta

Nil

5%

N/A

5%

Saskatchewan

5%

5%

No

10%

Manitoba

8%

5%

No

13%

Ontario

N/A

13%

N/A

13%

Quebec

9.975%

5%

N/A

14.975%

New Brunswick

N/A

13%

N/A

13%

Nova Scotia

N/A

15%

N/A

15%

Newfoundland/Labrador

N/A

13%

N/A

13%

Prince Edward Island

9%

5%

Yes

14%

Northwest Territories

Nil

5%

N/A

5%

Yukon

Nil

5%

N/A

5%

Nunavut

Nil

5%

N/A

5%



 

Top 10 HST Predictions for 2014

I would like to start of 2014 with my top 10 predictions for 2014 having to do with HST.

1. Fraudsters and scammers will use the Canada Revenue Agency name in vain more frequently in 2014 to take advantage of trusting Canadians.  We are hearing about this more often and I predict it will get worse because people are giving their information (and money) to people who call and say they are from the CRA. Canadians should be careful and ask for documentation.  It is sometimes obvious when documentation is in connection with a fraud/scam.  The CRA's telephone number is 1-800-959-5525 - call them and ask questions if you are ever unsure.

2. There will be more news of CRA employees engaging in inappropriate behaviour.  I am sorry to say this. The news stories of CRA employees inappropriately accessing taxpayer information, inappropriately accessing outside information and accepting bribes for lower assessments will increase in 2014.  The reporters are looking for these stories and oversight of CRA employees has areas for improvement.

3. GST/HST compliance will be an important topic for discussion in 2014. When the GST rate was 5%, a number of businesses did not put the effort into compliance. Now that the HST rates are much higher, companies will put money into reducing the risk of a large unexpected assessment.

4. The dollar numbers in Notices of (Re)Assessments will increase in 2014.  Ontario harmonized in 2010.  Quebec has harmonized.  Nova Scotia increased its HST rate to 15%.  The assessments in 2014 will cover the broader scopes and the higher rates.  Mistakes will be found.  This will lead to large assessments.

5. CRA auditors will become more aggressive in denying input tax credits where the business does not have documentary evidence to support the input tax credits.

6. The CRA will cite subsection 170(2) of the Excise Tax Act more often in 2014.  Subsection 170(2) places limits on registrants in participating provinces claiming input tax credits where the expense is not reasonable the circumstances having regard to the nature of the commercial activities of the registrant.

7. The CRA will continue to deny new housing rebates claimed by individuals and give as a reason that the individual did not live in the residence as a principal residence.  This trend started in 2013 and will continue in 2014. These assessments will not be based on audits per se.

8. Restaurants will be audited in 2014.  The CRA is on the lookout for the use of zapper technology.  The CRA auditors now have legislation to impose significant fines if they find zapper technology has been used.

9. CRA collections officers will be pursuing old assessments and will be active in collecting monies owed to the Government.  A number of persons have outstanding assessments of GST/HST.  This is low hanging fruit for government revenues.

10. The financial services rules will continue to be difficult and complex. The HST legislation will not be fixed in 2014.

What are the Typical Steps in a Tax Court of Canada Appeal?

Most Canadians know about the Tax Court of Canada, but are not aware of the typical steps in a GST/HST appeal proceeding before the Tax Court of Canada. The following is a list of the typical steps in an appeal under the general procedure rules (which is different than an informal procedure appeal - but similar):

1. The Notice of Appeal: The taxpayer (called the Appellant in the appeal) commences an appeal by filing with the Tax Court of Canada a Notice of Appeal and paying the applicable filing fee.  The Tax Court of Canada Rules sets out what must be in a Notice of Appeal.

2. Service of the Notice of Appeal: The Appellant files the Notice of Appeal with the Tax Court of Canada and provides 2 copies of the Notice of Appeal.  If the Appellant would like a stamped copy, they provide three copies.  The Tax Court of Canada serves the Department of Justice (the Department of Justice provides lawyers to Crown Agencies, such as the Canada Revenue Agency and defends the appeal).

3. The Reply: The Department of Justice must file with the Tax Court of Canada the Canada Revenue Agency's reply within 60 days after service of the Notice of Appeal and serve it on the Appellant within 5 days after the 60 day deadline. The Reply must set out information required by the Tax Court of Canada Rules.  Generally speaking, the Reply sets out which facts in the Notice of Appeal that the CRA admits, which facts in the Notice of Appeal that the CRA denies, which facts in the Notice of Appeal that the CRA claims no knowledge and the CRA's facts and assumptions that for the basis of the assessment.

4. The Answer: The Appellant has 30 days after service of the Reply to file with the Tax Court of Canada the Answer.  It is not mandatory to file an Answer. The Answer identifies new facts that must be provided in light of the Reply by the CRA.  The Answer must set out the information required by the Tax Court of Canada Rules.  Generally speaking, the Answer sets out which facts in the Reply that the Appellant admits, which facts in the Reply that the Appellant denies, which facts in the Reply that the Appellant claims no knowledge and additional relevant facts that will be put forth by the Appellant in the proceedings.  If an Appellant does not file an Answer, then he/she/it is deemed to deny all the allegations of fact put forward in the Reply.

5. List of Documents: Both the Appellant and the CRA file and serve a list of relevant documents within 30 days of the close of pleadings. In practice, the exchange of lists of documents may take longer.  The list of documents is a list and not the documents themselves.  Both the Appellant and the Respondent prepare a list of all relevant documents known to the party at the time which may be used in the proceedings as evidence by the party.  Either side may later ask for the production of any document listed. In practice, the Appellant will review the Respondent's List of Documents and ask for the production of documents that are not contained on the Appellant's List of Documents.  The same holds true for the Respondent.

6. Examinations for Discovery: Both the Appellant and the Respondent (the CRA) are entitled to ask questions to discover the what testimony may be provided in the case 9and to attempt to narrow the issues to be decided in the case).  Often the Department of Justice asks to examine the Appellant (if an individual) or the key personnel (if the Appellant is a business entity). Sometimes accountants and advisors are examined. The Appellant may examine the auditor, the CRA's appraiser, an appeals officer or another relevant person. A court reporter records the examination if it is in oral form.  Sometimes the examination may proceed by way of written questions.  The testimony is given under oath.  There is no timeline for the examinations for discovery.

7. Undertakings: During the examination for discovery, a party may not be able to answer a question or a document may be discussed that has not been exchanged.  The examiner will ask for an undertaking for the answer to be provided in writing or a document be provided. A list of Undertakings is exchanged shortly after the examination for discoveries.

8. Motions and Questions Presented to the Court: Sometimes examinations for discovery may be frustrated by refusals to answer questions and legal issues arising. When problems arise in the process, they are generally dealt with my a motion to the Tax Court.

9. Hearing Date Application: The Appellant and the Respondent jointly apply for a hearing date to be set after the examination for discoveries and the satisfaction of undertakings has occurred. The parties must indicate the number of days that will be required for the hearing,  In practice, the parties discuss lists of witnesses and a litigation plan is created by the Appellant's counsel. Calculating the number of days required for a hearing is not a science, but the litigation plan helps.

10. Pre-hearing Conference and Pre-Hearing Conference Brief:  After the hearing date has been set, the Tax Court of Canada may set a pre-hearing conference date (or the parties may apply to the Tax Court for a pre-hearing conference).  A judge will preside over the pre-hearing conference, but that judge will not ultimately hear the case. The purpose of the pre-hearing conference is to narrow the issues.Often the pre-hearing conference judge will give a first impression of the evidence and this may lead to a settlement because the weaknesses of the case are discussed. The Appellant provides a short Pre-Hearing Conference Brief in connection with the pre-hearing conference setting out the issues, the Appellant's theory of the case and propositions of law to be relied upon at the hearing. Where the parties have requested more than three days for the hearing, the Court may discuss the scheduling of the hearing in order to reduce the number of days needed for the proceeding.

11. Hearing:  This is the big event.  The witnesses testify and the arguments are presented. The Appellant and the Respondent will be required to file documents and books of authorities and detailed arguments prior to the hearing. During this time, settlement discussions may occur.

In addition to the above steps, there may be motions (e.g., the Department of Justice may ask the Court  to strike parts of the Appellant's proceedings, the Appellant may ask the Court  to strike parts of the Respondent's proceedings, either may bring jurisdictional questions to to the court, either may bring a motion to compel production of certain documents, etc) and request examinations of non-parties. Litigation may take many twists and turns.

British Columbia Residents and Businesses May Have to Self-Assess BC PST on Goods Brought Into the Province

In November 2012, the British Columbia Ministry of Finance issued Bulletin PST-013 "Tangible Personal Property (Goods) Brought Into British Columbia". On February 7, 2013, the British Columbia Ministry of Finance reissued Bulletin PST-013 "Tangible Personal Property (Goods) Brought Into British Columbia".

Self-assessment on goods brought into British Columbia was an issue under the previous social services tax regime - and it is back again with PST.  Individuals who bought goods outside British Columbia were required to self-assess BCSST when they imported the goods into British Columbia (even if the importation was in their luggage or vehicle).  Similarly, individuals from Alberta/Washington State (elsewhere) with chalets in the beautiful British Columbia mountains were required to self-assess BCSST.  These rules return with the implementation of the new and improved BC PST on April 1, 2013.

Some businesses who use imported goods for their own use (and the goods are not exempted) must self-assess BC PST with respect to importations of goods that occur after April 1, 2013.  Under the previous BCSST regime, this was a problem for many businesses.  Often there was documentation issues with respect to inter-provincial transactions because inter-Canada transactions do not require reporting to border officer (as is the case with importations from outside of Canada).

For example, I have a client in the Ontario who has a small branch operation in British Columbia. They load information on laptops in Ontario and train the BC employees on the systems in Ontario.  The employees return to British Columbia with their new computers after the training.  They will need to monitor these transfers as BC PST will be payable.

Another example would be the BC resident who travels to Ontario (or another Canadian province) for a vacation and buys artwork or clothing or other personal items.  Another example is a BC resident who buys a motor home or vehicle or boat in Alberta (or other province) and drives home to British Columbia.  These individuals will be required to self-assess BC PST whether they bring the goods to BC themselves or have the goods shipped to be delivered in BC.

Bulletin PST-013 "Tangible Personal Property (Goods) Brought Into British Columbia contains useful information for individuals about some of the applicable exemptions. However, there are no statutory references or references to the regulations because the publication was prepared prior to the finalizing of the laws.

British Columbia Issues Revised Bulletin for Registering for New BC PST

In December 2012, the British Columbia Ministry of Finance issued Bulletin PST-001 "Registering to Collect Provincial Sales Tax".  On February 26, 2013, the British Columbia Ministry of Finance issued a revised Bulletin PST-001 "Registering to Collect Provincial Sales Tax". Since the British Columbia PST starts on April 1, 2013, businesses need to turn their minds to whether they must register for BC PST purposes. There isn't much time left to you have your number on time and inputted into your compliance systems.

Businesses inside and outside British Columbia that were registered under the old and defunct social services tax regime cannot use their old BCSST number.  They must re-apply for and obtain a new PST registration number.  New businesses that have come into existence after harmonization (and those that existed prior to harmonization) will no longer be permitted to use their GST/HST number with respect to provincial sales tax (they will still use the number to collect and remit GST). These businesses in British Columbia need to register for and obtain a BC PST number.

Many non-resident businesses are also required to obtain a BC PST registration number.  I will leave it to another post to discuss the far-reaching nature of the registration and collection requirements in the new BC legislation.

Registration is possible on-line, in person or by fax.  The on-line registration process appears to be simple.  Please let us know if you have used the electronic registration method and how soon did you get your number.

We would be pleased to speak with non-residents of British Columbia concerning the new registration rules.  The British Columbia government closed gaps in the law (real and perceived) in order to ensure a greater tax base of registered businesses.

Finally the New BC PST Rules: The British Columbia Sales Tax Regulations Signed Into Law

We have been waiting patiently to report on the new (and improved) British Columbia provincial sales tax (de-harmonization) rules.  We are finally able to notify our readers of the regulations.

On February 28, 2013, the Administrator (on behalf of the Lieutentant Governor in Council of the Province of British Columbia) signed the Provincial Sales Tax Regulation and the Provincial Sales Tax Exemption and Refund Regulations. Since the BC PST comes into effect on April 1, 2013, businesses in British Columbia have one month the read the new PST rules and implement them in their systems. This will be quite a feat - especially where the rules are not the same as the previous version of the PST called the social services tax.

These new BC PST rules are the meat and potatoes of the new provincial sales tax.  There is also the Provincial Sales Tax Act (that received Royal Assent in May 2012) and Bill 2 - 2013 "Provincial Sales Tax Transitional Provisions and Amendments Act, 2013" (tabled February 13, 2013 and subject to change before becoming law).

The new BS PST is redesigned to permit changes in the PST without  the support of opposition parties.  Regulations are promulgated by the Lieutenant Governor in Council (the BC Cabinet) and do not need to be tabled in the Legislature for a vote.  As a result, the regulations can be changed by the governing party (with no public or legislative debate) to pursue their tax policy objectives.

Previously, the core rules were in the Act and the complimentary rules were in the regulations. 

Please refer back to The HST Blog for posts on the new BC PST rules.

Canadian Sales Tax Rates (as at May 1, 2012)

Canadian Sales Tax Rates Chart
As at May 1, 2012

Province/Territory

Provincial Sales Tax

GST/HST Rate

GST Included in PST Tax Base

Combined Rate

British Columbia

N/A[1]

12%[2]

N/A

12%

Alberta

Nil

5%

N/A

5%

Saskatchewan

5%

5%

No

10%

Manitoba

7%

5%

No

12%

Ontario

N/A

13%

N/A

13%

Quebec

9.5%[3]

5%[4]

Yes[5]

14.98%

New Brunswick

N/A

13%

N/A

13%

Nova Scotia

N/A

15%

N/A

15%

Newfoundland/Labrador

N/A

13%

N/A

13%

Prince Edward Island

10%[6]

5%[7]

Yes[8]

15.5%[9]

Northwest Territories

Nil

5%

N/A

5%

Yukon

Nil

5%

N/A

5%

Nunavut

Nil

5%

N/A

5%



[1] British Columbia will reinstate provincial sales tax on April 1, 2013 at a rate of 7%

[2] On April 1, 2013, the GST/HST rate will decrease to 5% because British Columbia is de-harmonizing

[3] Quebec will harmonize with GST on January 1, 2013. The proposed amended QST rate is 9.975%

[4] On January 1, 2013, the Amended QST, GST rate will be 14.975%

[5] Starting January 1, 2013 there will no longer be tax on tax

[6] Prince Edward Island will harmonize with GST on April 1, 2013. The proposed rate will be 14%.

[7] Prince Edward Island will harmonize with the GST on April 1, 2013 and impose HST at the rate of 14%

[8] Starting on April 1, 2013, there will no longer be tax on tax

[9] Will reduce to 14% on April 1, 2013

Federal Legislation to Start HST Implementation Passes

Canada's federal harmonized sales tax (HST) implementing legislation is Bill C-62 "Provincial Choice Tax Framework Act", which received Royal Assent in the House of Commons on December 15, 2009.  The Canadian Senate passed Bill C-62 on December 15, 2009.

Bill C-62 (became Chapter 32 upon Royal Assent) amends the Excise Tax Act (the “Act") to implement, effective July 1, 2010, the new fully harmonized value-added tax framework in Ontario and British Columbia. It also facilitates the new framework to accommodate any province's decision to have the provincial component of the harmonized value-added tax under the Act apply in that province by achieving a common understanding with Canada in respect of such a new framework.

It is important to note that the federal implementing legislation does not contain the place of supply rules, which will be implemented by way of regulation, instead of by way of legislation. This means that the House of Commons and Senate do not approve the place of supply rules. The place of supply rules regulations will become law upon promulgation of the Governor-in-Council (that is Cabinet). This may prove to be problematic and is a reason to watch the Canada Gazette carefully.