First Nation Persons and GST/HST Exempt Sales

Sep 13, 2021 GST/HST Commentary

First Nation persons and GST/HST exempt sales is a topic that can be confusing and legally complex. Who is eligible, and what goods and services qualify? What responsibilities rest with First Nations persons, bands or band empowered entities when making a purchase, and what responsibilities are the vendors? There are often many questions and concerns at the nexus of First Nation persons and GST/HST. For further guidance, consider speaking with an experienced lawyer at Jeremy Scott Law at 902-403-7201 today.

What Is GST/HST?

The goods and services tax (GST) is a value added sales tax that applies throughout Canada.  Some provinces have harmonized their provincial sales taxes with the GST to create the harmonized sales tax (HST). These include Ontario, Nova Scotia, New Brunswick, Prince Edward Island, and Newfoundland and Labrador. The GST rate is 5% in provinces with no HST. In Ontario the combined GST/HST rates are 13%.  The combined GST/HST rates in the remaining above-mentioned provinces is 15%.

Special Tax Status for First Nations Persons

When it comes to products and services sold on-reserve, First Nations Persons, Bands and Band Empowered entities  are generally not required to pay GST/HST on those purchases pursuant to Section 87 of the federal Legislation, which states that a First Nation person or band situated on a reserve is exempt from taxation on personal property. Additionally, First Nations persons or bands with interests in surrendered or reserve lands may not be subject to personal property taxation.  The Canada Revenue Agency’s administrative policy with respect to the GST/HST status of supplies made to or from First Nations Persons, Bands and Band Empowered Entities is outlined in Bulletin 039.  The CRA will generally require documentary proof of the status of the purchaser (such as a certificate of status card), as well as documentary proof that a supply was made on reserve lands (such as a receipt showing the place of delivery).

First Nations HST Point-of-Sale Exemption

In addition to the above outlined tax relief, there is a specific HST point-of-sale exemption applicable to off reserve purchases in the Province of Ontario only.  First Nations Persons and bands in Ontario are exempt from the 8% Ontario provincial portion of the HST on qualifying off-reserve acquisitions.

When imported into or acquired in Ontario, certain property and services are eligible for the HST point-of-sale exemption. These include:

  • Household items, clothing, furniture, new/used motor vehicles, take-out meals, and other tangible personal property
  • Maintenance agreement or warranty of the tangible personal property that qualifies
  • Telephone, cable television, internet, or other telecommunication service that falls under description of Part IX of the Excise Tax Act (Canada).

Property and services that do not qualify for the HST point-of-sale exemption include:

  • Alcoholic beverages including beer, wine, and liquor
  • Any form of energy including natural gas and electricity
  • Meals eaten inside a restaurant (take-out meals are exempt)
  • Gasoline and fuel (within the meaning of the Gasoline and Fuel Tax Acts)
  • Tobacco as described in the Tobacco Tax Act
  • New homes, hotel accommodations, condos, mobile homes, parking, and other real property or transient accommodations not situated on a reserve.

This point of sale rebate is applicable in the Province of Ontario only.

 Businesses Owned By First Nation Persons – Registering For GST/HST

First Nation business owners are required to register for GST/HST when that business has global taxable sales of products and services that exceed $30,000 in four consecutive quarters (given year). This amount increases to $50,000 for certain charities and not-for-profits.  First Nations businesses may provide the above explained exemptions to first nations purchasers, but are required to charge, collect and remit HST on supplies made to any non-qualifying customers.

GST/HST Rebates For First Nation Persons

There are several circumstances in which First Nation persons may claim a GST/HST rebate. These include:

  • For qualifying purchases of supplies or services made off-reserve, Ontario First Nations residents can recover the HST (provincial) part of the GST/HST
  • Amounts paid incorrectly for products delivered to or bought on a reserve
  • According to the Canada Revenue Agency, a band-empowered entity, tribal council, or band council that has paid GST/HST on purchases of meals, entertainment, short-term accommodation or transportation off-reserve may claim rebates of this tax..

How To Claim a GST/HST Rebate

In order to claim a GST/HST rebate, First Nation purchases may complete a General Application for GST/HST Rebate (GST Form189).  There are several different “reason” codes that describe situations in which a First Nations purchaser may be eligible. For example, reason code 1(A)  involves amounts paid in error for property or services purchased on or delivered to a reserve.  Generally when claiming a rebate, only one reason code is all that can be used per application. There are also circumstances in which a rebate cannot be claimed. Information regarding GST/HST rebate claims can be found at the Government of Canada website.

Contact Jeremy Scott Law Today

Clearly the rules around First Nation persons and GST/HST exempt sales are complex and there are many nuances and requirements that can be very difficult to interpret.  It is not possible to include every single aspect of GST/HST exempt sales in this short article. Those who need more information and answers to questions are invited to contact Jeremy Scott Law today at 902-403-7201.

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.

By Jeremy