Jeremy@Jeremyscott.ca
Jeremy Scott Law
Practical Indirect Tax Advice

Tag: GST

GST/HST Commentary
Businessman holding digital map of Canada

GST/HST on Digital Products in Canada

Nov 11, 2021 by Jeremy

GST/HST on Digital Products in Canada

Canada has always been a global importer and exporter of goods and services. However, with more and more digital products in the marketplace, it is important to understand the impact of GST/HST on digital products in Canada. Legislative changes occurred in 2021 that directly address the taxation of digital economy businesses. If your business has digital products, contact the experienced tax attorney at Jeremy Scott Law at 902-403-7201 to help you better understand how you can remain compliant under these new laws.

New Canadian Tax Laws for Digital Economy Businesses

The Fall Economic Statement 2020 by the Government of Canada specifically addressed digital economy businesses. The measures discussed were ultimately revised and adopted as of July 1, 2021. As of this date, any digital economy business (including digital economy operators) may have new GST/HST obligations on their digital goods and/or services.

Types of Businesses Impacted by These New Laws

Every foreign business owner should receive specific advice regarding the way these new laws may impact their digital goods and/or services. In some cases, a business may not be required to charge and collect GST/HST. In other cases, businesses may be under an obligation to charge their customers GST/HST as a ‘digital platform operator’ for supplies obtained through a digital source or platform. Some of the types of businesses that may be affected by these new laws could include the following:

International Sellers of Digital Services and Products

Foreign-based businesses, vendors, or distribution platform operators that sell taxable digital services and/or products to Canadian companies or consumers may now face GST/HST obligations. Under the previous law, non-resident persons did not need to collect or remit GST/HST if they were not considered to be carrying on business in Canada.  As a result, the consumer that purchased the digital good or service was required to self-assess the tax applicable on the good or service and pay the tax directly to the CRA. In reality, consumers rarely assessed and self-remitted this tax, and many purchases of digital goods and services through digital platforms went untaxed. As a result, Canadian business that supplied digital goods and services and who were required to collect the GST/HST were at a significant financial disadvantage when compare to these non-residents suppliers. The new law essentially requires that all non-resident vendors collect and remit GST/HST if the total amount of their  taxable digital goods and services sold to Canadian consumers exceeds $30,000 over a 12-month period.

Fulfillment Warehouses

Non-resident vendors and/or non-resident distribution platform operators who distribute qualifying goods that are delivered and/or made available in Canada may also face these new GST/HST obligations. Vendors involved in making supplies of “qualifying tangible personal property” and who have goods located in a fulfillment warehouses in Canada, will also need to register for and collect GST/HST.

Again, under the new rules, both resident and non-resident distribution platform operators would need to register if the total amount of their qualifying goods to Canadian purchasers exceeded $30,000 over a 12-month period of time.

Short Term Accommodation Platforms

Suppliers of short-term accommodation services (or accommodation platform operators) may also face these GST/HST obligations. Specifically, the new GST/HST laws will impact transactions that involve short-term accommodation rentals of private residential property that are made available through digital platforms.  For example, whether or not GST/HST applied on an accommodation through a platform such as AirBnB depended upon whether or not the property owner was registered to collect GST/HST.  Under the new rules, the platform operator will often be required to collect GST/HST on all short term stays, regardless of whether or not the owner is a GST/HST registrant.

Impact of GST/HST on Digital Products in Canada

According to the previously mentioned Fall Economic Statement, retail e-commerce in Canada rose by nearly 70% in 2020. While some of this trend may be due to the lockdown and COVID-19 global pandemic, society as a whole has moved towards consuming more digital goods and services. The tax laws of Canada proved far too antiquated to capture these digital transactions, which placed local business at a financial disadvantage when compared to foreign competitors. If your company is involved in the sale, distribution, or transfer in any way of digital goods and services in Canada (either as a domestic or foreign entity), you should consider contacting an experienced tax attorney at Jeremy Scott Law to see if you have any increased legal or financial obligations under these new laws.

More Changes in 2022

Additionally, along with these new GST/HST laws, the Canadian government is expected to implement a new tax on corporations providing digital services, effective January 1, 2022. This new proposed tax will attempt to capture revenue from digital corporations specifically regarding value-creating activities through remote digital means. This could include the collection of user data or content creation, which is not currently under or subject to the Canadian corporate tax laws. The tax landscape for Canadian businesses is ever evolving and changing, especially when it comes to those corporations that are involved in the sale or distribution of digital goods and services. Visiting with an experienced tax attorney can help ensure your business remains compliant, regardless of any new adopted laws.

Contact an Experienced Canadian Digital Sales Tax Attorney

If you are a resident or non-resident business that provides digital goods or services to Canadian residents, you may have questions regarding whether you have any new financial obligations with respect to GST/HST on digital products in Canada. If your business has digital products that are offered for sale to Canadian consumers, contact an experienced tax attorney at Jeremy Scott Law at 902-403-7201 to ensure you understand all your legal obligations. 

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 Commentary

Sales Tax 101 For Canadian Startup Companies

Oct 23, 2021 by Jeremy

Owning and operating a Canadian startup company can be a highly lucrative and exciting venture. At the onset of establishing a business venture, however, there are many major decisions to be made regarding how the company will operate. A major piece of the puzzle involves taxes. How much are Canadian startup companies expected to pay in taxes? Are there tax incentives available for small businesses? It can be difficult navigating the world of Canadian taxes, particularly in the midst of many other crucial business decisions.

At Jeremy Scott Law, we provide our clients with professional legal advice to help startup companies make well-informed decisions regarding their taxes. Understanding how Canadian taxes apply to business transactions and corporate organization is vital to optimizing a startup company’s success. As a leading Canadian tax law firm, we believe in leveraging tax incentives and regulations to help startup companies optimize their profits. Call us at 902-403-7201 to learn more today.

The Basics: Types Of Sales Taxes and the Place of Supply Rules

The Canadian tax system utilizes two main categories of sales tax for businesses, both of which must be considered when forming a startup company, depending on where the business is located and the customers it services:

  • Goods and Services Tax (GST) is Canada’s federal value added sales tax.  Some provinces have opted to ‘harmonize’ their provincial sales tax with the federal government creating the Harmonized Sales Tax (HST).  In those provinces, the GST rate is increased, with a portion of the revenues going to the provincial government, even though it has been levied by the Canada Revenue Agency.
  • Provincial sales tax (PST) is a separate sales tax levied by the various provincial governments.

The GST applies to most supplies of goods and services made in Canada, including supplies of goods, services, real property and intangible personal property. The GST is levied nationally at a rate of 5%. Several provinces have opted to “harmonize” their provincial sales tax with the GST, creating the HST, although the rate does vary by province.  Currently, the HST rate in Ontario is 13%, while the HST rate in Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland is 15%.

Most provinces utilize either a PST + GST combination or a streamlined HST. Alberta is the lone exception, being the only province without a PST or HST.  The Retail Council of Canada provides a comprehensive province-by-province list of tax rates.  It should be noted that Quebec adopted the Quebec Sales Tax (QST). Like the HST, in that it is a “value added” tax rather than a pure sales tax.

The crucial difference between the Value added tax and a traditional sales tax is that value added taxes are generally recoverable throughout the supply chain. In other words, most businesses (other than those involved in exempt activities) will be entitled to recover any GST/HST/QST paid in the course of their operations. In addition to being involved in a ‘commercial activity’ it is important the business is registered for the applicable GST/HST or QST PRIOR to incurring the expense. Register for the GST/HST or QST too late, and you may lose out on your ability to recover taxes already paid.

Who Must Register For GST/HST?

Canadian businesses which exceed $30,000 in taxable sales over the last four consecutive calendar quarters are required to register for GST/HST. Note that taxable sales by associated parties may need to be included in the $30,000 threshold calculation. Businesses which do not meet this revenue test may voluntarily register for GST/HST

The Canada Revenue Agency does provide some information to assist startups understand when to charge GST/HST. Check this CRA website for more specific information regarding what are considered taxable supplies in Canada.

Who Must Register For PST?

Each Province has separate rules for determining if and when a business needs to register for its provincial sales tax.  Recent changes in most provinces require vendors to register if they carry on business within a province, or if they make routine sales into the province.  It is important that every new business consider whether or not they have sales tax obligation in particular jurisdiction, even if they may not have a physical presence in the province.

Place Of Supply

With the understanding of who charges taxes and how the tax rate differs from province to province in mind, we must now clarify how “place of supply” is established for Canadian startup companies. Especially for companies that operate online and sell globally, establishing “place of supply” can be quite confusing.

In Canada, place of supply refers to the location in which a sale, lease, or taxable supply is made. Place of supply rules operate differently depending on the type of products and services that a startup offers.

Regardless of the type of products or services that your startup provides, you must know where your clients and customers are located. Collect billing addresses or IP addresses to confirm your customer’s locations and charge the appropriate tax rate accordingly. For customers within Canada, you will focus on applicable PST or GST/HST, depending on the province where your customer is located.

How Can A Tax Lawyer Assist My Canadian Startup Company?

Navigating the arena of taxes when establishing a startup company is as stressful as it is necessary. A full understanding of how to charge taxes is crucial, as mistakes can result in very expensive consequences. In order to minimize unnecessary expenditures and adhere to strict tax regulations, speaking with an experienced tax lawyer can make all the difference.

At Jeremy Scott Law, we work alongside entrepreneurs at all levels of the startup journey to uncomplicate the tax process. We ensure that Canadian startup companies are operating in accordance with Canadian and foreign tax rules and regulations while avoiding common tax pitfalls. We take the responsibility off of business owners and allow them to focus on what drives their company forward. Experienced tax lawyers are available at 902-403-7201 to discuss solutions that work for you and your company.

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 Commentary
European Continent with Flags

What You Must Know About EU VAT If You Have European Customers

Oct 6, 2021 by Jeremy

Establishing a business within Canada requires an understanding of Canadian tax law and the rules and regulations surrounding how to charge sales tax within the country. But what happens when your business extends beyond Canadian borders and into the European market? Unfortunately, European Union value added tax, or EU VAT, does not follow the same procedures as the traditional Canadian tax system. This can pose a new set of challenges to business owners.

Making tax mistakes when conducting international business can, and often does, result in tremendously expensive consequences. Luckily, mistakes are easily avoidable when you are armed with knowledge of how to navigate EU VAT. At Jeremy Scott Law, we help Canadian businesses implement tax strategies and solutions that work, saving them substantial time and money in the process. Let us uncomplicate the tax process for you. Call us at 902-403-7201 to find out how.

What Is EU VAT?

Value Added Tax, or VAT, is a consumption tax that is applied to tangible and digital goods or services sold in countries that utilize such a tax system. The European Union, as a whole, uses VAT through the supply chain, from production to point of sale. This means that as a Canadian business, if you sell to customers located in the EU, you must charge VAT.

The standard tax rate cannot be below 15%, but reduced rates as low as 5% can be applied to specific products or services. Annex III of the VAT Directive lists the products and services that qualify for reduced rates. Failing to comply with a country’s VAT rules and regulations can result in steep penalties and fines. Penalties may even be brought against businesses who intentionally fail to register for VAT.

There are several types of VAT rates utilized in EU countries depending on the country as well as the types of products/services sold. While the EU has worked to simplify VAT procedures, there are still significant nuances that businesses must account for. For instance, if your company sells to another business in Europe, you may not need to charge VAT. Furthermore, new EU VAT rules governing cross-border e-commerce were rolled out in July of 2021.

I Sell Directly To Customers. Do I Need To Charge VAT In The EU?

Yes. Any goods or services sold directly to customers within the EU are subject to VAT charges. A business must be registered for a VAT Mini One Stop Shop (MOSS) scheme in an EU country by the 10th day of the month after the first sale to a EU-based customer. Opting out of the VAT MOSS scheme means that your business must register for VAT in each and every EU country where you supply digital services.  

I Sell To Other Businesses. Do I Need To Charge VAT In The EU?

No. All business to business (B2B) sales in the EU are zero rated, meaning no VAT is charged. These sales should still be recorded, with proof of delivery, VAT number of the business customer, and the “intra-EU dispatch of goods” phrase clearly indicated on the invoice.

What Do I Need To Know About The New EU VAT E-Commerce Rules?

In July, 2021, the European Commission adopted new rules for e-commerce and VAT. Everyone is affected by the new VAT e-commerce rules, from online sellers and marketplaces to software platforms to everyday consumers. If your business sells directly to customers (B2C), then it is important to understand the changes. 

In an effort to streamline VAT registration, businesses are now required to register for the declaration and payment of VAT in only one EU state. This is facilitated by the One Stop Shop, an online portal that businesses can use to comply with EU VAT regulations.

Moreover, the VAT exemption for goods imported to the EU under EUR 22 has been abolished, meaning all commercial goods are now subject to VAT and formal customs declaration. The EU adopted the Import One Stop Shop (IOSS) to facilitate easy VAT declaration and payment of low-value goods. Therefore, for shipments valued at EUR 150 or below, VAT can be charged using the IOSS or collected from the final customer by the customs declarant. 

The new EU VAT rules also impact online marketplaces. Any online marketplace that facilitates the buying and selling of goods is now considered a “deemed supplier,” meaning they are responsible for charging and collecting VAT. The VAT rate charged is that of the consumer’s country of residence.

It should be noted that these changes only govern business to customer (B2C) sales. For business to business sales, the new e-commerce VAT rules do not apply.

How Can A Tax Lawyer Help Navigate EU VAT?

The complexities of EU VAT extend far beyond what we have reviewed today. Seeking the assistance of an experienced tax lawyer can help your business navigate European Union VAT charges and avoid costly mistakes. The tax procedures of the EU are not the same as the regulations that businesses abide by in Canada. As such, it is important to move forward carefully and mitigate risk wherever possible. At Jeremy Scott Law, we leverage our years of experience to help businesses and startup companies make well-informed tax decisions. Through our legal counsel, we allow business owners to focus fully on growing their companies. Let us help you take your business to the next level. Call Jeremy Scott Law at 902-403-7201 today to speak with an experienced tax lawyer and learn how to navigate European commerce efficiently and successfully.

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 Commentary

First Nation Persons and GST/HST Exempt Sales

Sep 13, 2021 by Jeremy

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.

GST/HST Commentary

GST/HST Interest & Penalties Apply On “Net Tax”

Sep 2, 2021 by Jeremy

The tax laws enforced by the Canada Revenue Agency (CRA) can be overwhelming and complicated. In some cases, interest and penalties apply on certain taxable amounts. In a recent court case, the Federal Court of Appeal in Canada has taken a definitive stance on GST/HST interest and penalties that apply on the “net tax” that remains after deducting certain claims. This court case changes the legal landscape regarding the amount of tax that interest and penalties can be applied to for a business or individual. In many cases, taxpayers are unaware that they have the legal right to pay less in interest and penalties if the CRA made their calculations incorrectly. If you are curious as to how interest and penalties apply in your specific case, consider contacting experienced Canadian tax lawyer Jeremy Scott at (902) 403-7201 or Jeremy@Jeremyscott.ca today.        

GST/HST Taxes

There are two types of taxes that apply to certain goods and services in Canada.

GST Taxes

The goods and services tax (GST) applies to certain goods and services made in Canada. The GST also applies to both real property (buildings, land, etc.) as well as intangible property (trademarks, intellectual property, etc.).

HST Taxes

The harmonized sales tax (HST) is a way for certain Canadian provinces to “harmonize” their provincial sales tax with the GST.  The Canadian provinces that blend their provincial sales tax with the GST are New Brunswick, Nova Scotia, Ontario, Newfoundland and Labrador, and Prince Edward Island.  In these Canadian provinces, the HST applies to the same types of goods and services as the GST, but at a higher combined rate.

Who Must Pay GST/HST Taxes?

Nearly everyone must pay the GST/HST taxes on the applicable goods and services. However, some specific organizations and groups will not always have to pay GST/HST taxes, including certain provincial and territorial governments and Indians.

Understanding GST/HST Interest and Penalties

When GST/HST tax returns and any associated tax payments are submitted in an untimely manner, the CRA’s standing administrative position on the calculation of interest and penalties has been that these amounts are applied to “all amounts outstanding.” The CRA has stated that “all amounts outstanding” does not include any rebates, input tax credits, or any possible available refunds. The CRA has until recently indicated that any other amounts that are outstanding will be subject to additional interest and penalties often prior to considering what, if any, amounts are owed by the CRA to the taxpayer.

Canada v. Villa Ste-Rose, Inc.

In 2021, Canada’s Federal Court of Appeals heard the case Canada v. Villa Ste-Rose, Inc. that directly addressed this specific position of the CRA. In this case, Villa Ste-Rose, Inc. (Villa) was a not-for-profit corporation that essentially operated a residence for senior citizens. Due to a fire that destroyed their building, Villa submitted a return in an untimely manner. Villa was not entitled to input tax credits, as the supplies they were claiming were exempt. However, Villa was entitled to rebates under Sections 256.2(3) and 257(1) of the Excise Tax Act.

The original amount of penalty and interest assessed by the CRA did not take into consideration the GST/HST rebates that were due to Villa. Villa appealed to the Tax Court of Canada (TCC) and argued that the GST/HST interest and penalties should be based solely on the “net tax” owed, not the total amount collectible. The TCC agreed with Villa and made the determination that GST/HST interest and penalties should be based only on the “net tax” owed by a taxpayer.

GST/HST Obligations

The reporting requirements and obligations surrounding GST/HST interest and penalties can be confusing and challenging to understand. In many cases, taxpayers remain unaware of their full legal tax obligations. If a taxpayer finds themselves up against the CRA regarding an attempt to collect interest and penalties on amounts that are not to be included in the amounts due to the CRA, they ought to consider challenging the assessments. If you find yourself concerned about the amount of interest and penalties assessed on you as a taxpayer, consider visiting with Jeremy Scott Law to learn more about your legal rights and obligations when it comes to your GST/HST interest and penalties.

How an Experienced Tax Lawyer Can Help

In many cases, filing for your taxes, and making determinations regarding possible GST/HST penalties can be legally complex. An experienced tax lawyer can help you with the following:

  • Create an overall tax planning solution that specifically caters to your specific financial needs
  • Provide different solutions to minimize taxes payable, without ever violating any Canadian tax laws
  • Provide a comprehensive tax return that limits the possibility of any CRA audit or prosecution
  • Properly calculate your taxes, ensuring that any and all possible exemptions are applied
  • Discuss any possible GST/HST interest and penalties
  • Defend and represent any client that encounters tax issues with the CRA (businesses, not-for-profit organizations, or individuals)

Contact Jeremy Scott Law Today

If you believe that you were assessed GST/HST interest & penalties inappropriately, or if you have any questions regarding your taxes in Canada, consider visiting with an experienced tax lawyer. In many cases, individuals and businesses simply do not know their legal options to reduce their taxable amount, or how to successfully argue against the CRA regarding interest or penalties assessed. Even where a GST/HST tax reassessment may be valid, Jeremy Scott provides the experience and expertise necessary to help answer your questions, and ensure you pay the minimum amount of penalty and interest required under the law. We look forward to visiting with you, and helping you through any issues you may have regarding GST/HST interest & penalties on “net tax” or any other tax questions you may have. Contact our legal team at (902) 403-7201 today to learn more, and schedule an appointment to address your specific tax questions.

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 Commentary
Hands at Keyboard

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 Commentary

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.

GST/HST Commentary

Six Ways the GST/HST Rules for Charities and Not-For-Profits Differ from Everyone Else!

Apr 19, 2021 by Jeremy

Trying to understand the special GST/HST rules which apply to Charities and Not-For-Profit Organizations can be complicated. Especially for someone who has historically only examined the GST/HST rules applicable to ‘For Profit’ businesses. Below is a list of 6 areas where the rules for charities and NPOs differ from everyone else.

  • The GST/HST Registration Threshold.

In general, most people are required to register for GST/HST if their taxable worldwide sales exceed $30,000 in any single calendar quarter, or over the span of four consecutive calendar quarters. For NPOs and charities this threshold is increased to $50,000. Furthermore, charities which exceed $50,000 in taxable sales but have gross revenues under $250,000 are still not required to register for GST/HST.

  • Electing to Provide Separate Branches or Divisions with Their Own $50,000 Threshold.

While the threshold for GST/HST registration purposes typically includes any taxable revenues from all operations, this is not always the case.  In some instances, where a charity or NPO has multiple branches or divisions, it may be possible to elect with the CRA to have each separate branch or division considered separately for purposes of determining whether or not GST/HST registration is required.

  • Claiming Rebates where ITCs are not available.

As with most businesses, charities and NPOS are entitled to claim input tax credits (‘ITC’) to recover certain amounts of GST/HST incurred in the course of their commercial activities.  A portion of the GST/HST not recouped as an ITC is recoverable by filings a Public Service Body Rebate (‘PSB Rebate’).  The exact amount of the rebate is dependent upon the type of organization, what it does, and what rate of tax has been paid (5%, 13%, 15%).  

  • GST/HST Registration is not required to claim the PSB Rebates!

Many organizations are under the mistaken belief that they must be registered for GST/HST to claim the PSB rebate.  This is simply not true.  All charities are entitled to claim a PSB rebate, regardless of whether or not they are registered for GST/HST.  For NPOs is a little more complicated.  NPOs are not required to be registered for GST/HST to claim a rebate but they must meet a ‘qualifying test’.   A ‘qualifying’ NPO in one who receives at least 40% of its total revenue from government funding sources.  What qualifies as government funding and how the 40% test is calculated is described in more detail in the Canada Revenue Agency’s Guide – RC4034  GST/HST Public Service Bodies’ Rebate . 

  • The Rules Regarding when to Charge GST/HST are Vastly Different than for Businesses.  

Generally, the GST/HST applies to all goods and services sold in Canada.  There are a wide range of GST/HST exemptions that apply only to certain types of PSBs or charities.  For example, certain types of fundraising activities which may be taxable if performed by a for profit business may in fact be exempt from the GST/HST when undertaken by a charity or NPO.  It is tremendously important to understand these unique rules exist, and to ensure they are reviewed to fully grasp when your organization is required to collect GST/HST.

  • Completing GST/HST Returns for Registered Charities.

There is an often-missed set of GST/HST reporting rules which apply to registered charities.  In general, when a charity is registered for and collects GST/HST – they report only 60% of the taxes collected.  The retain the other 40% of the tax collected, but as a direct result are not entitled to claim ITCs with respect to these operations.  In certain instances, the full amount of tax collected must be reported (such as on sales of certain capital property, or when the GST/HST has been collected in error).  It may be possible to elect out of these special rules where certain conditions have been met.  Please note these special reporting rules apply to Registered Charities only.

In conclusion, there are many nuances in the GST/HST legislation that are unique to Charities and NPOs.  I have touched on a number of them and hope that you find this information useful, please note however that many of these rules are complex and I encourage you to conduct further research to ensure you fully understand how they impact your organization.  Please reach out to me should you require further assistance in understanding how the GST/HST impacts your organization.  

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.

Regards,

Jeremy

© Jeremy Scott 2021. All rights reserved.