Jeremy@Jeremyscott.ca

Month: July 2021

Do You Need To Register For Provincial Sales Taxes?

Jul 20, 2021 by Jeremy

 

Do you need to register for Provincial Sales Tax (PST)? Canada is unique in its administration of sales tax. Not only are there multiple types of sales tax, but the requirements vary from province to province. It is not surprising that many businesses are left wondering which taxes they need to register for, collect, and remit. At Jeremy Scott Law, we offer practical guidance to businesses about which taxes they are subject to and how to ensure they are complying with local rules. With the recent uptick in e-commerce and digital services, rules are constantly changing about what goods are taxed. Call the experienced tax lawyer Jeremy Scott at 902-403-7201 if you would like to discuss whether you need to register for provincial sales taxes, and ensure your legal and financial rights remain protected.

Sales Tax in Canada

In Canada, sales taxes are levied by both the federal government and the provinces. The federal tax, called the Goods and Services Tax (GST) or the Harmonized Sales Tax (HST), is a federal value-added tax. The GST applies across the country, while the HST is in effect only in certain provinces. In British Columbia, Manitoba, and Saskatchewan, there is a separate provincial sales tax called the retail sales tax (RST).

Most of the provinces, excluding Alberta, levy a sales tax, called the Provincial Sales Tax (PST). In some provinces, however, where the HST is in effect, the HST encompasses the provincial sales tax rate, so both the federal and provincial taxes are administered by the Canadian Revenue Agency. These provinces include Ontario, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador. The goal of the HST is to “harmonize” federal and provincial sales taxes to simplify administration and reduce costs. In reality, however, businesses can face new complications from the varying tax rates across provinces.

Sales Tax by Province

Below is a grid depicting the various tax rates per province or territory.

ProvinceTotal Tax RateTax Type
Alberta5%GST only
British Columbia12%GST & PST
Manitoba12%GST & RST
New Brunswick15%HST
Newfoundland and Labrador15%HST
Northwest Territories5%GST only
Nova Scotia15%HST
Nunavut5%GST only
Ontario13%HST
Prince Edward Island15%HST
Quebec14.975%GST & QST*
Saskatchewan11%GST & PST
Yukon5%GST only

* Quebec’s provincial sales tax is called the Quebec sales tax (QST). Note that Revenu Quebec administers both the QST and the GST/HST when applicable to Quebec businesses.

When Does a Retailer Need to Register for Provincial Sales Tax?

According to the Canadian Revenue Agency, a business must register for the GST/HST when:

  • It makes taxable sales, leases, or other supplies in Canada, and
  • It is not a small supplier

Canadian retailers generally need to register for and collect the GST or HST when their sales exceed $30,000 over one calendar year. However, each province has its own rules regarding eligibility for sales tax. For example, Manitoba’s threshold is only $10,000 of taxable sales, while Saskatchewan has no small seller exemption. Retailers are responsible for complying with all of the requirements of the federal tax and the tax of the province in which it is located.

If a province has adopted the HST, the retailer collects the total tax rate and then remits a proportional amount of the tax to the Canadian Revenue Agency and the appropriate provincial tax agency.

However, if a province has not adopted the HST, a business that sells or delivers taxable goods in that province is responsible for collecting the GST and the province’s PST separately and remitting those taxes to the appropriate agency. Canadian business owners should consider consulting with a lawyer to ensure their businesses are complying with local and federal sales tax requirements.

Exempt Goods

One factor that impacts whether you need to register for provincial sales taxes is the type of goods you sell. Under the GST/HST, necessities like groceries, medicine, and healthcare services are exempt from sales tax. Rules regarding exempt goods vary by province.

When Does an Out-of-Province Seller Need to Register for PST?

With the advent of e-commerce, sales taxes have become somewhat convoluted. Many out-of-province sellers are left wondering if they have all their bases covered. Generally, provincial sales taxes are only applicable to retailers that sell or deliver non-exempt goods in that province. However, remote, online sellers cannot evade this requirement.

Provincial governments are beginning to impose new requirements to ensure online retailers doing business there are subject to provincial sales tax. British Columbia, for example, enacted legislation that imposes the PST on out-of-province retailers that:

  • Sell or deliver taxable goods to British Columbia,
  • Solicit orders through advertising or other means to purchasers in British Columbia, and
  • Accept purchase orders from customers in British Columbia

Note that these rules expand tax requirements beyond businesses that have a physical presence in British Columbia, although online advertising alone is probably not sufficient to establish “solicitation” for purposes of the tax.

Similarly, Saskatchewan amended its Provincial Sales Tax Act in 2020 when it required operators of “electronic distribution platforms” and “online accommodation platforms” to register for the provincial sales tax, as well as “marketplace facilitators.” This law is intended to require online businesses to register for the Saskatchewan PST and charge sales and remit sales tax on purchases made through those platforms, including digital purchases like movies and music.

Because each province is unique, it can be difficult to tell when you need to register for PST (provincial sales taxes). If you are operating a Canadian e-commerce business, or simply want to ensure you are complying with local and federal sales tax obligations, consider consulting with an experienced business lawyer in your area.

Talk to an Experienced Canadian Tax Lawyer

If you are left wondering if you need to register for provincial sales taxes, you are not alone. Many business owners struggle to keep up with the constantly changing rules and regulations surrounding Canadian sales tax. Jeremy Scott Law provides clients with practical tax advice about when to register for GST/HST, as well as each province’s PST. We also represent clients during tax audits and when attempting to recover over-paid taxes. Call our legal team at 902-403-7201 or contact us online to raise questions or concerns about Canadian sales tax and learn more about all of your tax options.

If you found this information valuable, I encourage you to check out my other blog posts.

The Disclaimer:

Please note the content above and throughout this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.  I urge you to seek specific legal advice by contacting me (or your current legal counsel) regarding any legal issues you may face.  I do not warrant or guarantee the quality, accuracy or completeness of any information found on this website and will not be held liable for anything contained in this document or any use you make of it. Finally, accessing the information on my website does not create a lawyer-client relationship.

GST, HST and Residential Rental Properties

Jul 8, 2021 by Jeremy

Building new properties and maintaining rental properties are already expensive as it is, but factoring in GST and HST can make the process even more burdensome. The Canadian Revenue Agency does offer partial tax rebates for new construction and there may be tax credits available if the property is going to be used for short term rental purposes.  Consider speaking to an experienced tax lawyer to ensure you are maximizing your tax benefits, especially if you are a commercial builder or landlord. Call Jeremy Scott Law at 902-403-7201 or contact us online with your GST/HST questions, and allow us to provide practical and helpful tax advice.

When Does the GST/HST Apply to Residential Rental Properties?

If you are in the business of renting properties, there will probably be sales tax implications.

Purchasing Rental Property

For many landlords, the rental process begins with purchasing a rental property from a builder. When a property owner purchases a new construction or substantially renovated residential rental property, they must pay GST/HST on the purchase. This even applies to builders who have constructed the property and then “self-supplied” it. Purchases of new homes or substantial renovations may be eligible for a rebate, however, which will be discussed in further detail below.

Maintaining Rental Property

If you are in the business of renting property on a long term basis, generally the GST and HST paid on operating expenses is not recoverable. However, if you are in the business of renting property on a short term basis (Ie daily or weekly stays), then it may be possible to recover the GST and HST incurred on your expenses through the claiming of input tax credits.

When Is a Buyer Eligible for a Residential Rental Property Rebate?

There is a federal tax rebate available for purchasers who have bought a new construction or newly renovated home from a builder. The rebate also extends to payments employing others to build or renovate a rental home, modifying a non-residential property into a residential property, or buying land to be leased to others. To qualify for the new residential rental property rebate, there are a few criteria the purchaser must meet listed below.

  1. The new residential property must be occupied immediately by tenants for at least one year. The landlord cannot be the first person to live in the new rental property. It must be immediately rented out.
  1. The purchaser must claim the rebate with the Canada Revenue Agency. The builder cannot claim the rebate. The buyer must claim the rebate by submitting an application to the Government immediately following closing on the property.

The rebate applies to:

  • Purchasers who paid the GST/HST on the closing of a new or renovated housing complex in a residential building
  • Builders who accounted for GST/HST on the self-supply of a residential complex
  • Co-operative housing corporations (“co-ops”) that paid the GST/HST upon purchase or self-supply of a residential complex or addition to a residential complex.

Self-supply refers to a situation where a builder has built the residence and then sold it to itself as the owner. There may be other scenarios in which the purchaser of a rental property can claim the rebate. Consider speaking with an experienced Canadian tax lawyer for more information if you believe you may qualify for this rebate.

How Do I Calculate the Rebate?

Once you have determined your eligibility, the residential rental property rebate is fairly straightforward to calculate. The rebate applies to properties where the fair market value of the qualifying residential unit is less than $450,000 at the time the tax was payable. One exception to this limit is for residential trailer parks – in this case, the fair market value must be less than $112,500. The NRRP is then calculated at 36% of the GST (or the federal portion of the HST) paid on the purchase. The maximum rebate is $6,300. There may be rebates available for provincial sales taxes as well. Ontario offers a rebate of 75% of the provincial portion of HST, with a cap of $24,000.

What If I Rent a Vacation or Second Home?

Even if you are not in the business of being a landlord, any property that you rent should be considered in your tax liability. Again, any income generated from a rental property must be included in either a personal tax return, or if operated through a business, in the business’s tax return.

If you manage an Airbnb property, you may also need to collect the GST/HST on your rental property. Generally most short term rentals (Ie rentals for less than 30 consecutive days) are subject to GST/HST however even some long term rentals can be taxable – if the rental is of a ‘hotel type’ property.  The policy here is that short-term rentals are subject to sales tax, while long-term rentals are generally not.

As of July 1, 2021 Airbnb may collect this tax in certain limited circumstances if the property owner does not collect the tax on their own behalf.  Property owners should consider how this impacts their operations so they understand who must account for the GST/HST remit it to the Canada Revenue Agency.

Bear in mind that you may not be subject to the GST/HST if you are considered a “small supplier” per the Canada Revenue Agency. A small supplier is one whose revenue is less than $30,000 in the last four calendar quarters.

Get Help from an Experienced Canadian Tax Lawyer Today

Whether you own large residential rental properties or simply rent out a vacation home for a few months of the year, you most likely have both federal and provincial tax obligations. Determining which taxes you are subject to and how much you owe can be challenging, so consider reaching out to Jeremy Scott Law with your tax questions. We enjoy working with clients to minimize their tax liability and maximize their potential rebates. Give us a call at 902-403-7201 or contact us online with your GST/HST rental property questions, and allow us to provide practical and helpful tax advice.

If you found this information valuable, I encourage you to check out my other blog posts.

The Disclaimer:

Please note the content above and throughout this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind.  I urge you to seek specific legal advice by contacting me (or your current legal counsel) regarding any legal issues you may face.  I do not warrant or guarantee the quality, accuracy or completeness of any information found on this website and will not be held liable for anything contained in this document or any use you make of it. Finally, accessing the information on my website does not create a lawyer-client relationship.