Planning for transitioning from HST to GST/PST
Diana Mau, C.A.
205-8833 Odlin Crescent, Richmond, B.C.
Tel: 604-279-9270
www.dianamau.bc.ca
History of consumer taxes
Prior to July 1, 2010 Federally, we have 5% GST Provincially, we had 7% PST Total 12%
History of consumer taxes
On July 1, 2010, GST & PST combined together to become 12% HST (Harmonized Sales Tax)
HST is a combination of Federal 5% GST plus BC portion of 7% to 12
HST basically follows the rules of GST with some minor allowances
April 1, 2013 revert to GST/PST
HST drops from 12% to 5% GST PST of 7%
Mechanism of GST
Multi-stage tax GST applies to a very broad base of most property &
services, including real property Refund of GST to businesses through the Input Tax
Credit (ITC) on taxable supplies Businesses collect GST on sales from its customers
and claim back all its GST paid on purchases GST is truly a tax borne by final consumers Efficient Tax, avoid tax cascading
Exceptions to general taxable supplies- Zero-rated
Instead of the general 5% GST, the 5% become 0% on certain items that the Govt consider necessary, such as
Basic grocery, farm livestock, fishery Prescriptive drugs, drug dispensing fees Medical devices Exports International transportation except in North
America
Exempt Goods & Services
Under the exempt supply rules, businesses do not charge GST/HST on sales from the customers, but businesses cannot claim the GST/HST paid on the purchases.
Examples of Exempt Supplies
Used residential housing- no HST on purchases of used homes
Most health, medical and dental services performed by licensed physicians or dentists
Child care services Educational services Music lessons Financial services
Elect to be Exempt Suppliers
Small businesses with annual sales under $30,000 may elect not to be a taxable supplier, and be an exempt supplier
Usually beneficial for those small businesses who deal with final consumers and who have little purchases on which GST/HST being paid, e.g. some small home-based businesses
Understanding PST
Single (final) stage tax A much narrower base than GST Applies to most goods Real property and most services not
taxable Notably are new home purchases, home
repairs, restaurant services
PST Imposition General rate of 7% on tangible personal property
(goods) Liquor – 10% Vehicles under $55,000 – 7%; $55,000 to <$56,000
– 8%: $56,000 to <$57,000- 9% & $57,000 or over - 10%. No graduation rate.
Boats & aircrafts – 12%, no GST 7% on related services 7% on legal services Accommodation – 8% + 2% hotel tax
Tangible personal property -goods
Tangible goods that you can see, weigh, measure, feel or touch
Also included are gas, heat, electricity But does not include real property
Taxable Goods
Alcoholic beverages Automobiles & parts Boats Building materials Clothing & footwear Furniture & appliances Natural gas, heat, telecommunications Office supplies & equipment
Taxable goods – Exemptions (1)
All food for human consumption (basic groceries and restaurant meals)
Bicycles Children-sized clothing & footwear Adult-sized clothing and footwear
purchased for children under the age of 15 Used clothing & footwear under $100
Taxable goods – Exemptions (2)
Books, newspaper & periodicals Medications (prescriptive & specific over-
the counter medications) Vitamins School supplies Energy products for use in residential
dwellings
Taxable Related Services
Repair or maintain of taxable goods, such as automobiles, knives, watches TVs, stereos, office equipment or computers
Apply protective treatments to taxable goods such as fabric protection, rust proofing
Restore taxable goods such as furniture
Exempt Related Services
Services to exempt goods such as repair bicycles
Cleaning services Services to clothing & footwear Services to household appliances such as
fridges, stoves, ovens, dishwashers, washers, dryers, freezers, vacuums, rug cleaners, curtains & drapes
Services to animals
Exemptions specific to businesses
Goods purchased for resale or lease Goods incorporated into goods for resale Eligible machinery & equipment for use in
manufacturing , logging mining etc Specified goods purchased for use by
qualifying farmers & fishermen
Exemptions - specific circumstances
Goods shipped directly by the seller outside B.C.
Eligible goods purchased from small seller Independent sales Contractor
Small Seller
Located in BC but does not maintain an established business premises, such as home based is O.K.
Sells taxable goods or services Gross annual taxable sales under $10,000 Not registered as a vendor
Independent Sales Contractor (ISC)
Not an agent or employee of the direct seller Offer to sell exclusive products at temporary
locations like PNE/fairs Pay PST on the suggested retail price when
purchase from direct sellers Purchase exclusive products from a direct seller
or another ISC for resale or personal use ISC charges & collects PST from customers &
reimburse themselves for PST paid
Example of HST vs GST/PSTExample 1
12% HST
Example 2
5%GST /7%PST
Legal service provided $1000 $1000GST/PST collected $120 GST $50
PST $70
Expenses $600 $600HST GST/PST paid on expenses
$72 GST $30
PST $42
Net GST/PST remittance $48 GST $20
PST $70
Amount of non-refundable PST $42
Consumer paid $1120 $1120
Bookkeeping for HST
DR. CR.
Cash $1,120
HST payable $ 120
Fee revenue $1,000
Cash $672
HST receivable $ 72
Office supplies/ Equip $600
Bookkeeping for GST/ PST
DR. CR.
Cash $1,120
GST payable $ 50
PST payable $ 70
Fee Revenue $1,000
Cash $672
GST Receivable $ 30
Office supplies/equip $642
Registration to collect PST
Vendors of PST taxable products / services must register and collect PST
Vendors include those who sell & lease taxable goods, provide related services, provide 4 or more short term accommodation, provide legal services, provide telecommunication services, direct sellers to independent sales contractor
Registration not required
Person who does not make taxable sales Persons excluded from definition of
vendor including Small Seller Independent Sales Contractor
Registration for Manufacturers & Wholesalers
Manufacturers/Wholesalers who don’t make retail sales are not required to register.
Required to provide exemption certificate on purchase of raw materials or goods for resale.
Manufacturers/ Wholesalers who make retail sales are required to register unless make infrequent sales, can remit PST as casual remitter.
PST registration
PST registration begins on Jan 2, 2013 PST registration done prior to April 1,
2013 New 11 digit PST numbers
When PST is due
Earlier of date consideration is paid or is due
For most businesses (other than exempt or small suppliers), consider making payments or getting invoice prior to April 1, 2013 to save PST even if not taking possession of goods before April 1, 2013
Housing, Transition Tax & Rebate
What you need to know about HST/GST/PST on new housing transition tax, rebate & vendor information requirement
HST of 12% on new housing
Until March 31, 2013, HST of 12% on new housing, comprising of Federal GST of 5% and B.C. portion of 7%
Federal GST Housing Rebate
Federal Govt Rebate equals 36% of the 5% GST paid on the first $350,000 to a max of $6,300 ($350,000 x 5% x 36%)
The GST rebate is phased out on a straight–line basis for homes priced between $350,000 and $450,000
No Federal rebate for homes priced at $450,000 or above
B.C. New Housing Rebate (1)
From July 1, 2010 to March 31, 2012, BC rebate equals to 5% of new home price (or 71.43% of tax) up to a max of $26,250 (or 5% of $525,000)
From April 1, 2012 to March 31, 2013, the max B.C. rebate is increased to a max $42,500 (or 5% of $850,000)
B.C. New Housing Rebate for owner built new homes (2)
April 1, 2012, max rebate increased to • $42,500 if HST is paid on land• $28,475 if no HST is paid on land Rebate available on homes under
construction at March 31, 2013, home must be occupied and rebate apply before April 2017
B.C. New Housing Rebate (3)
In addition, during the HST period from July 1, 2010 to March 1, 2013, B.C. Govt estimates that there would be about 2% savings on the PST otherwise payable on building cost that may be passed to home owners.
Hence for lower cost homes (max $850,000), there should be no increase in B.C. portion of taxes
B.C. First Time Home Buyer $10,000 Refundable Tax Credit
Effective between February 21, 2012 to March 31, 2013
For B.C. residents who are first-time home buyers ( has never previously owned a primary residence anywhere in the world) and who purchase an eligible new home as primary residence
B.C. First Time Home Buyer $10,000 Refundable Tax Credit
For new homes purchased from a builder. a written agreement of purchase and sale is entered into on or after Feb 21, 2012 and sale is completed prior to April 1, 2013
HST is payable on the home No one else has claimed the $10,000
bonus
B.C. First Time Home Buyer $10,000 Refundable Tax Credit
For owner-built homes, a written agreement of purchase is entered on or after Feb 21, 2012 and construction of the home is completed or occupied before April 1, 2013
No one else has claimed the $10,000 bonus
How is the credit calculated
5% of the home price to a max of $10,000 Claw back if single individual net income
>$150,000 @ 20 cents per every dollar, zero at net income of $200,000
Claw back for couples net income > $150,000 @ 10 cents per every dollar, zero at net income of $250,000
No PST on New Housing, but 2% B.C. Transition Tax
Effective April 1, 2013, no 7% of B.C. portion of HST on new homes
2% B.C. transition tax on substantially renovated or new housing where 10% or more is completed as of April 1, 2013 and the sale occurs before April 1, 2015
No tax if less than 10% completed on April 1, 2013
Rebate to builders for work done after March 31, 2013
Intended to compensate builders for PST paid on materials after March 31, 2013
Rebate based on % completion
Transition Rebate to Builders
% completed-April 1, 13 Rebate as % of sales price
- Less than 10% No transition tax
- 10% - < 25% 1.5%
- 25% - < 50% 1.0%
- 50% - < 75% 0.5%
- 75% - < 90% 0.2%
- 90% or more none
Transition Rebate to Builders
To claim the transition rebate, builder will be required to certify that the builder paid PST on substantially all of the building materials that were incorporated on or after April 1, 2013 into the construction
The builder will be required to keep receipts fro audits
Example on B.C. Transition Tax
Builder enters into a sale agreement to sell a newly constructed home for $600,000
Ownership & possession date June 1, 2013
The home is 80% completed on April 1, 2013
Example on B.C. Transition Tax
Builder has to collect 5% GST on $600,000 to Federal Govt
Builder has to collect 2% B.C. transition tax = $600,000 x 2% = $12,000
Builder can claim builder’s rebate of 0.2% = $600,000 x 0.2% = $$1,200
Builder can make a net remittance of $10.800 ($12,000- $1,200) to B.C.
Other transition provision for contractors
Contractors subject to PST self-assessment on materials purchased prior to April 1, 2013 but used after March 31, 2013 to improve property on both residential & commercial real property
Builder Disclosure Requirements
Applicable to agreement made on or after Feb 17, 2012 with closing after Dec 31, 2012
Disclosure must include no 7% B.C. portion of the HST and 2% B.C. transitional tax for ownership & possession of newly constructed or substantially renovated housing between April 1, 2013 and April 1, 2015
Must provide disclosure to purchaser at later of Jan 2, 2013 or the date agreement signed
Builder Disclosure Requirements
Additional information required for sales closing after March 1, 2013 on
Consideration for GST purposes Whether transition tax applies and if so,
the amount of B.C. transition tax % of completion as of April 1, 2013 Amount of B.C. transition rebate claimed
Builder Disclosure Requirements
Failure to comply Builder Disclosure Requirements, builder is subject to penalties of
1% to a max of $10,000 per home Penalty quadruples of willful default or
gross negligence
Impacts for consumers
Whether PST will increase or decrease the cost of purchases for consumers?
What’s not taxable under PST
HST GST + PST
Most newspaper 12% 5% GST, no PST
Certain school supplies 12% 5% GST, no PST
Most magazines 12% 5% GST, no PST
Thermal insulation, weather stripping, caulking
12% 5% GST, no PST
First aid kits 12% 5% GST, no PST
Smoke detector <$250 12% 5% GST, no PST
Food producing plants 12% 5% GST, no PST
What’s not taxable under PSTHST GST + PST
Adult sized clothing for children 12% 5% GST, no PST
Shoe repairs 12% 5% GST, no PST
Tailoring services 12% 5% GST, no PST
Dry cleaning 12% 5% GST, no PST
Used clothing or footwear for less than $100
12% 5% GST, no PST
Snack foods 12% 5% GST, no PST
Prepared foods 12% 5% GST, no PST
Restaurant meals 12% 5% GST, no PST
What’s not taxable under PSTHST GST + PST
Basic cable TV services 12% 5% GST, no PST
Local residential phone 12% 5% GST, no PST
Services to household appliances as fridges
12% 5% GST, no PST
Cleaning services 12% 5% GST, no PST
Home security monitoring 12% 5% GST, no PST
Services to real property – painting, roofing plumbing, electricity
12% 5% GST, no PST
Landscaping to real property 12% 5% GST, no PST
What’s not taxable under PSTHST GST + PST
Computer software repairs service, software installation
12% 5% GST, no PST
Taxi fares 12% 5% GST, no PST
Camping sites 12% 5% GST, no PST
Domestic air 12% 5% GST, no PSTNewly constructed homes 12% 5% GST, no PST
New homes where construction begins before April 1, 2013
12% 5% GST, + 2% B.C. transition tax
Real estate commission 12% 5% GST, no PST
What’s not taxable under PSTHST GST + PST
Drugs & medications e.g.
Cough syrups, flu remedies12% 5% GST, no PST
Vitamin & supplements 12% 5% GST, no PST
Admission fees, movies 12% 5% GST, no PST
Memberships, golf /sports 12% 5% GST, no PST
Bicycles 12% 5% GST, no PST
Safety helmets 12% 5% GST, no PSTChildren’s ski gloves, boots 12% 5% GST, no PST
Adult’s sized ski boots for children < age 15
12% 5% GST, no PST
What’s not taxable under PST
HST GST + PST
Massage therapy 12% 5% GST, no PST
Fitness training services 12% 5% GST, no PST
Hair/barber services 12% 5% GST, no PST
Veterinarian services 12% 5% GST, no PST
Accounting services 12% 5% GST, no PST
Interior design services 12% 5% GST, no PST
Wedding planning 12% 5% GST, no PST
Funeral services 12% 5% GST, no PST
What’s not taxable under PST for consumers
HST GST + PST
Cigarettes 5% GST, no PST
Cigars 5% GST, no PST
Chewing Tobacco 5% GST, no PST
Nicotine Replacement products
5% GST, no PST
What’s going up in PST for consumers
B.C. first time new home buyers’ refundable tax credit up to $10,000
For purchase agreement entered into on or after February 21, 2012 and sales completed prior to April 1, 2013, i.e.sales subject to 12% HST
Beneficial for new home buyers of homes under $850,000
What’s going up in PST for consumers
Purchase or lease of vehicles
HST GST + PST
Under $55,000 12% 5%GST+ 7%PST
$55,000 to <$56,000 12% 5%GST+ 8%PST
$56,000 to <$57,000 12% 5%GST+ 9%PST
$57,000 and over 12% 5%GST+ 10%PST
What’s going up in PST for consumers
HST GST + PST
Children’s disposable diapers
5% 5% GST+7%PST
Alcoholic beverages 12% 5%GST+10%PST
Short term hotel accommodation
12% 5%GST+ 8%PST
Impacts for Businesses
Consider whether your business is taxable or exempt
Most businesses are taxable suppliers, the PST will increase their cost of doing business. Buy or pay before April 1, 2013.
Exempt businesses may realize savings. Buy after March 31. 2013.
Need more information ?
CTB (Consumer Taxation Branch) Phone: 1-877-388-4440 or 604-660-4524 Email: [email protected] Website: gov.bc.ca/pst Website: sbr.bc.ca