This is a reminder concerning an often overlooked HST transition measure concerning anyone involved in residential real property construction work. Under the old Ontario Retail Sales Tax ("RST") persons involved in real property contracts were not considered as vendors but as consumers of the construction materials used in their trade. As such they did not have to collect the 8% RST; this is why, doors and windows installation companies, roofmakers,. plumbers and most people involved in the construction, repair or renovation of real property such as land, housing and buildings did not have to collect or charge the 8% RST on their work.
On the other hand, these persons, as consumers, paid the 8% RST on their purchases of construction materials, and this simply formed part of their costs. Naturally, since July 1, all these persons are required to collect and pay the 13% HST on work realised and billed after July 1. To the extent they are using for these contracts construction materials purchased before July 1, (upon which they paid the 8% RST), there is a double taxation element that the Ministry partially alleviates with the introduction of the Retail Sales Tax Transitional Inventory Rebate.
Effectively, this rebates allows many persons involved in residential construction to recover the 8% RST included in inventory of construction materials on hand on June 30th. There are some limitations and conditions for the rebate, detailed governmental information is available here. Reading this material may make many feel that there are two many conditions and that it is not worthwhile. Our experience has been that application of the policy is realistic and that it is fairly easy to recover the 8% RST included in inventory on hand on June 30th, to the extent it is used up by December 31.
IMPORTANT CONDITIONS FOR REBATE
Two VERY IMPORTANT conditions must be remembered. First, there is a December 31, 2010 deadline to file the refund claim, so if you were too busy to get to it, DON'T WAIT TILL NEXT YEAR, ACT NOW! Available refunds will be lost if a refund claim is not filed before December 31. As is always the case, in view of the complexities involved, it may be worthwhile to consullt a professional sales tax consultant to help you with the claim; many will charge a fee based on a percentage of refunds recovered.
Another important restriction is that the refund does not apply to RST relating to construction materials used in new residential housing construction or to materials used in non-residential construction. Nevertheless, qualifyiing residential real property contracts would include contracts to repair or improve land and items permanently attached to land, such as buidlings and patios. Contracts for repair and improvements to rental housing, condominium and apartment buildings and long-term care residential care facilities generally qualify for the rebate.
A lot of small businesses out there can get the 8% RST included in inventory of construction materials on hand on June 30th.
But they must act VERY QUICKLY and probably get the assistance of a professional sales tax consultant.
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