Tomorrow, July 1, HST becomes a reality for Ontario and B.C.; in addition Nova Scotia's existing HST rate jumps from 13% to 15%. Registrants now must deals with rates of 5%, 12%, 13% and 15% not counting Quebec's "harmonized" QST of 7,5%.
Are you ready to comply? Have the appropriate changes been made to your cash registers, computers and accounting systems? Are your employees properly trained and familiar with the new requirements? Will they be able to properly charge and collect the tax?
IF you do sales through the Internet, have the sites been update to collect the appropriate tax? If you are a small business using a simplified method have you considered the impact of the new rates on your gross profit? If you sell at tax-included prices, did you adjust your prices and/or price lists (especially if you sell in more than one province)? (You did have clauses in your contract allowing for such in case of changes in the rates didn't you?)
If your business (or its associates) sells for more than $10 million annually, you are aware of the new limitations to "input-tax credits" on electricity, telecommunications services, fuels and meals and entertainments, right? You are familiar with the exceptions to these limitations which will limit the impact of these measures?
If you are a contractor doing real property work you realize that your "tax environment" changes completely tomorrow, don't you? You are aware of the refunds available on "Ontario sales tax paid construction materials" on hand on June 30, aren't you?
If you are a manufacturer you know the proportion of energy used directly in your production activities (excluding lighting, air conditioning and heating of production areas) to ensure you still claim maximum ITC on energy consumption in the context of the limitations to ITCs, don't you? did also compare your actual consumption to the available "proxies" rates allowed by CRA to determine which is more advantageous? You are aware that an election must be filed to use "proxies" (although forms to make the election are not yet available)?
CONGRATULATIONS! If you answered YES to ALL questions you are ready for HST. If not, well now's the time to get ready and do what has to be done to avoid problems. You really would not like to be assessed (with interests and penalties) a few years down the road because you didn't prepare properly way back in 2010.
If you don't have the time to ensure all appropriate steps have been taken, it is wise to consult with a professional who can rapidly determine your needs, your accountant ( if sufficiently knowledgeable in sales tax) is a good resource but a specialist in sales tax matters ( such as yours truly) can rapidly assess your needs and, more importantly, provide peace of mind probably for as little as a few hundred dollars.
Special note for Gatineau readers:
Do not think these changes do not concern you; in fact Quebec's GST registrants which never collected Ontario Sales Tax when they sold to Ontario are the persons more at risk to wake up with a costly assessment. Indeed, while Quebec did not join the HST provinces, it is important to note that if you are a GST registrant, you are AUTOMATICALLY also an HST registrant. This means, that starting tomorrow, if you sell goods or provide services to Ottawa residents you MUST collect and remit the 13% HST. In addition, changes in "place of supply" rules may impact you more if you provide services. For example, what happens if you provide services both in Ontario and Quebec to the same client? GST or HST may apply depending on circumstances.
Accordingly, any Gatineau registrants providing goods or services in Ottawa is affected by the HST changes and must be appropriately prepared.
As always, the devil is in the details and it is the unusual transactions that generally cause problems and result in assessments, so in closing, it is important to develop the proper attitude: it must become a reflex to automatically wonder about any GST/HST impact on any, and especially, unusual transactions. Only then will you be truly prepared for HST.
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