This is the first in a series of articles about dealing with the implementation of the new HST on July 1, 2010. Later articles will address industry specific issues pertaining to certain industries.
If you are lucky enough to only have to change the tax rates in your point of sale program or accounting package, rejoice! You are among the fortunate ones. For those not so lucky, you really need to develop an implementation plan for dealing with the change to HST on July 1st.
Some of the issues that should be considered, among others are:
If you sell certain products, you will be required to give a point of sale rebate to your customers – that is, charge them only the federal GST (5%) portion of the HST. This applies to sales of: books, child sized clothing and footwear, baby diapers, children’s car seats and booster seats, feminine hygiene products, motor fuel (for automobiles, boats, airplanes, trains) and residential energy. This will require software updates for point of sale systems and for accounting systems used for billing.
Any ongoing contracts, such as leases, memberships, or other regular supplies of goods and services, will require that HST be charged starting July 1, 2010, which will change payment amounts, so any pre-authorized payment plans will need to be modified.
Where goods are delivered or ownership transferred after June 30, HST will have to be charged. So make sure to ship out any goods BEFORE June 30th, if possible, so that 5% GST can be charged instead of 12% HST.
Any property brought into BC after July 1, or delivered after July 1, will be subject to the BC portion (7%) of the HST, unless it is used exclusively for commercial use by a registrant. Anyone required to pay the BC component of the HST would be required to self assess and pay this amount.
Don’t forget that a final PST return will need to be filed for PST registrants, and that supplemental PST returns may be required if work done or goods delivered before July 1 are not billed out until after July. In addition, returns or exchanges may require additional returns to be filed, if PST is refunded on a returned item.
A final point is the new rules for recapture of Input Tax Credits that apply to large businesses. The term “Large Business” is somewhat misleading, the restriction on the ability to claim input tax credits can apply to businesses that do not consider themselves “Large”. A business is a large business if the total revenues for the year exceed $10,000,000. However, that $10,000,000 threshold includes all associated persons, who are very broadly defined for HST purposes. The HST rules for large businesses are complex and convoluted. If you think they might apply to your business, you should contact your accountant for clarification.