Get up to date on what you need to do about the transition to HST

February 10, 2010 by Dan White.

Harmonizing local business with tax

Susan Bussieres, senior resource officer from Canada Revenue Agency (CRA) recently held a meeting in Burns Lake in order to present information to local business owners about the proposed Harmonized Sales Tax (HST).

In B.C. the HST would be taxed at a rate of 12 per cent, and in Ontario it will be 13% consisting of seven and eight per cent federal taxes and five per cent provincial taxes.

The HST is planned to be implemented in B.C. and Ont. on July 1 2010.

According to the CRA, the HST once introduced, would apply to most transactions that become due, or are paid without having become due on or after July 1, 2010.

The HST would also apply to any memberships that become due or are paid on or after July 1, 2010, however CRA notes that HST would not apply to the transaction if more than 90 per cent of the membership period is before July 2010.

For example, selling year long memberships; On Jan. 2 2010 a yearly gym membership is sold which will expire on December 21, 2010. The HST will not apply to the sale of this membership because the membership fee becomes due before May 2010.

But continuous services such as cellular phone services, natural gas and cable television services will be subject to the proposed HST.

HST could also possibly apply to returns and exchanges purchased before the HST comes into effect but returned after the introduction of the HST.

Generally the HST will apply to the sale of goods when the goods are delivered and when ownership of the goods is transferred to the purchaser on or after July 1, 2010.

Zero rated taxable supplies [goods that do not attract HST] include prescription drugs, medical devices, basic groceries, some agriculture and fishing supplies and exports.

According to the CRA point of sale rebates for the provincial part of the HST (seven/eight per cent) would be introduced for children’s clothing and footwear, children’s car seats and booster seats, children’s diapers, books, including audio books, feminine hygiene products and motor fuel. [The retailer would automatically provide the purchaser with a point of sale rebate by only collecting only the five per cent federal component as they do now].

For further information about the HST go to www.cra.gc.ca/harmonization-

HST has a potential for a lot of tax problems, to ensure you stay on the right side of the line, learn about LazyBooks, audit ready bookkeeping system.

For more information on audit ready accounting go to http://taxauditsolutions.ca

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Happy Sales Tax to you! HST is now the law both Federally and Provincially.

December 25, 2009 by Dan White.

You have to love the politics ot tax problems. HST is now the tax we love to hate.
For me, it is the tax I love.

Why does Dan like HST.
1. Only one tax collector to deal with.
2. One entire Tax Act to not deal with.
3. Much easier to understand.
4. Much easier to track.
5. As a business we get our HST back in the form of tax credits. This is a big improvement over PST.
6. Our new audit ready bookkeeping keeps perfect track of the GST/PST trantition to HST…. I love easy.
7. It puts more money into circulation for the consumer to get their hands on.

Yes it is normal to resist change, but when it comes to resisting HST. It goes like this….there is no point in peeing into the wind. All you get is a wet face. You need to pee and the wind needs to blow. It is an ill wind that blows no good. So if you weigh the good and the bad, you will see that the HST is more better than it is badder.

So if you want any help with your tax problem transition to HST, give us a call at 1-905-668-4816 for your tax solutions or visit our site and read the article on audit ready bookkeeping. www.taxauditsolutions.ca

HST   is …
Happy Sales Tax to you!

Dan White

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Harmonized Sales Tax becomes law in Ontario
Posted Dec 24, 2009 By Rosalyn Stevens

Liberal MPP Yasir Naqvi has been travelling the province talking up the benefits of the HST, in his role as the parliamentary secretary to the Revenue Minister.
Desmond Devoy, Ottawa East EMC
Liberal MPP Yasir Naqvi has been travelling the province talking up the benefits of the HST, in his role as the parliamentary secretary to the Revenue Minister.

EMC News - On July 1, 2010, Ontario residents will wake up to a reformed tax system designed to boost the economy and create jobs, while offering tax cuts to the province’s most vulnerable, according to Ottawa Centre MPP Yasir Naqvi. The controversial Harmonized Sales Tax (HST) bill passed into law on Dec. 9 at the provincial legislature, despite strong opposition by the Progressive Conservative (PC) opposition.

Mr. Naqvi, the Parliamentary Assistant to the Minister of Revenue, said the reorganized taxblending the 8% provincial sales tax and 5% federal goods and service tax into a single 13% levywould give the manufacturing sector a much needed boost by eliminating the multiple taxation levels currently in place. As well, he said, income tax cuts and permanent sales tax credits would assist low-income residents and families in a sort of “stimulus funding for individuals.”

However, Nepean-Carleton MPP Lisa McLeod, the opposition revenue critic, said the new tax will do nothing but hurt the provinces most vulnerable with an additional 8% tax on many items previously exempt.

“They essentially ignored 75% of the population who was telling (the government) they don’t want this new tax, not now,” she said.

The opposition fought hard against the tax change, which Mr. Naqvi said has been successful in other Canadian provinces. Opposition tactics drew national attention as MPP’s protested the act, including one move which saw two MPP’s refuse to leave the legislature after being ejected by the speaker. Ms. McLeod said the party also filed over 5,000 amendments to the law, looking to slow down progress through legislative procedure.

Despite the opposition, which included thousands of signatures on petitions from the PC party, Mr. Naqvi said the new law would benefit everyone in Ontario by bringing the province’s tax system inline with those of “modern” economies.

“We have, obviously, concrete, empirical evidence from Quebec and Atlantic Canada where they did the same thing,” he said.

While many itemssuch as home heating, and gasolinewill see an additional 8% levy, Mr. Naqvi said the majority of items will not increase in price. Currently, he said 83% or consumer spending in Ontario includes the full 13% tax.

To offset the increases, Mr. Naqvi said new, permanent tax cuts and credits would be introduced on January 1. That means that residents receiving the federal GST credit will also receive a provincial credit, with the first cheques scheduled to be in the mail in August. Come tax time, residents will see cuts to the lowest tax bracket, offering support for low income families, and seniors on fixed income, as well as other individuals making less than $37,000 a year. To ease the “sticker shock” expected during the first year, the province would also make one-time payments of up to $1000 for families, and $300 for individuals.

“That is why we continue to argue it is not raising taxes,” Mr. Naqvi said. “It’s revenue neutral.”

Ms. McLeod said the opposition PC party would continue to fight against the tax law, though she said the province is currently locked into the plan for five years, with a penalty of $4.3 billion to be paid to the federal government should they reverse the decision.

She said the tax cuts aren’t enough to save Ontario residents from the financial burden of an increased cost on many common products.

“It’s disingenuous for the McGuinty government to tell Ontarians that is a good deal, because it simply isn’t,” she said.

The federal government is expected to pass a bill that would enable the province to apply the new tax, and would include a transfer payment of $4.3 million to cover the cost of tax cuts and credits. However, Ms. McLeod said she doesn’t feel the government is supporting the tax change, rather supporting the province’s right to manage its taxation system.

“The federal government isn’t supporting Mr. McGuinty’s plan to hand out $4.5 million in bribe cheques before the next election,” she said.

Though the law has passed, she said there is an opportunity for change in the 2010 budget, noting that her party will continue to pressure the government for changes at that point. She said the Liberal government has had a difficult session in the legislature, and added that the controversy of the HST would add to the party’s difficulties when the house sits again in the New Year.

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Regarding the HST and how things shake down for investments.

November 28, 2009 by Dan White.

Regarding the HST and how things shake down for investments.

Personally I think the whole investment industry needs an overhaul, starting with getting rid of the Securities Commissions.

The investment industry is too complicated and there are too many things that can go wrong. There are too many regulations that Canadians have not asked for and there are too many people losing their savings.

Having said that, I agree with Tom Bradley, having any tax on building wealth is wrong.

The solution as I see it is to opt to become an active trader and recover your GST by way of input tax credits.  What this means to me is a whole new business evolution were there is no such thing as passive investors. Investors will need to learn about business and then they won’t have a HST Problem.

In order to emplement the business solutions and to be able to stand up to a CRA audit, you will need to learn how to create audit ready trading records. You will need to set your investing up properly to pass the test of being an active business.

Failing setting up your books and records properly, you will find that CRA can and will be abusive in a tax audit.

To learn more about audit ready accounting, go to www.tax-audit-solutions.com or go to www.danwhite.ca  or go to www.blog.danwhite.ca

Read on to see what Tom has to say about how HST is going to effect passive investors.

Dan White
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HST will hurt investors and their nest eggs

Protesters on the front lawn of the B.C. Legislature before the Throne Speech in Victoria, Aug. 25.

Protesters on the front lawn of the B.C. Legislature before the Throne Speech in Victoria, Aug. 25. GLOBE AND MAIL

Tom Bradley explains how Ontario and B.C.’s new HST isn’t helpful for investors

Tom Bradley

Published on Friday, Nov. 27, 2009 4:29PM EST Last updated on Saturday, Nov. 28, 2009 3:46AM EST

Note to reader: I have an axe to grind. I own and operate a low-cost mutual fund company – and I’m hopping mad about the HST.

The impact of Ontario and British Columbia’s harmonized sales tax will be negative for investors. No matter who you want to blame – the government or the investment industry – there is no getting around the fact that resulting higher all-in fees, compounded over a long investment horizon, add up to real dollars. For a long-term investor, it will be the difference between an Audi and a Taurus, or golfing in Florida versus watching the Battle of the Blades on CBC.

There are compelling arguments and precedent for not further taxing Canadian’s retirement capital, but unfortunately they’ve fallen on deaf ears because of bad timing and the wrong messenger.

The timing relates to budget deficits. From what the insiders have told me, bureaucrats have been sympathetic to the investment issues around HST, but the response from a higher authority has been clear and consistent: “This is going to happen because we need the money. Focus on implementation and we’ll talk about the inequities later.” Recessions are a bad time for rational arguments and good policy.

As for the messenger, Joanne De Laurentiis and her team at the Investment Funds Institute of Canada (IFIC) have done a good job of laying out the arguments why the HST is bad for Canadian investors. But IFIC is an organization whose membership is made up of too many firms that charge world-leading fees, and have been reluctant to share the benefits of their scale with clients. IFIC’s association with Bay Street’s fat cats has hurt its credibility when arguing against HST.

The banks, which represent tens of millions of investors, have been surprisingly mute on the issue. They have huge mutual fund operations that attract HST, but most of their other investment and savings products are tax exempt. Their silence may be the result of their conflicted position, but it may also be because the impact of the HST is hard to figure out. As is often the case with tax policy, the legislation will significantly change the wealth management landscape, and not for the better.

Canada’s regulatory patchwork, cut up by geography, product type and ancient history, has already inadvertently shaped how investment products are designed and sold. Structured products, for example, fall between the regulatory cracks and have been given freer rein to make marketing claims and obscure their fees and risks. A whole industry has been built around this regulatory arbitrage (playing one off against the other).

The HST will distort the industry more broadly, however, because some financial services are HST-able, while others are not (Note: The tax experts I consulted with are cringing at the simplification). The relative competitiveness of every product on the shelf will be affected, some good, some bad. The inequity lies in situations where there are products that are indistinguishable as to their objectives, risks and underlying investments that sit on opposite sides of the HST line.

Let me give you the early betting line on how it will play out, for both providers and clients.

Short-term vehicles like GICs and high-interest savings accounts will continue to be tax exempt. Money market and short-term bond funds on the other hand are taxable. Their attractiveness relative to banking products has always ebbed and flowed, depending on interest rates and the banks’ funding requirements. But the tax will tilt the balance toward the deposit-taking institutions. Because investors have options when it comes to their savings needs, they will not be hurt in this case.

Facilitating a transaction is exempt from tax, so any form of service that charges a commission, as opposed to a management fee, will fare better. Hiring an adviser to select and buy individual securities won’t incur tax, but getting professional help in another form – by buying a mutual fund – will.

The unfortunate consequence of different tax treatment for commissions versus fees is the likely reversal of a trend that has seen clients shifting to fee-based accounts. These accounts, which charge fees based on assets as opposed to transaction activity, better align the interests of advisers and clients. To be clear, the adviser is being paid for advice in both cases, whether it be a taxable fee or tax-exempt commission.

Structured products are not subject to HST. Compared to mutual and pooled funds, they will become more competitive. Again, for the client, any shift in this direction will be a step backwards. Structured “anything” is more expensive, complex and poorly understood. Firms selling exchange-traded funds (ETFs) have argued against HST on behalf of their clients, but from a competitive standpoint, they are huge winners in the HST realignment. Taxes on ETFs will go up, but due to their low fees, it won’t be much. The fee gap between ETFs and conventional funds will widen.

I’m mad because this additional tax on Canadians’ retirement goes against one of our country’s, and dare I say our government’s, highest priorities – getting Canadians to invest more for retirement. It hammers individuals who are investing on their own, and puts them at a bigger disadvantage compared with members of company pension plans. And its urgent and sloppy implementation negates years of efforts by the industry and regulators to improve how financial services are delivered.

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GST/RST to HST is going to be a nightmare of bookkeeping.

October 21, 2009 by Dan White.

 Ontario announces HST transition rules

Well, Our government has done it again, they have taken a good thing and turned it into a problem for business. This change is going to be a nightmare for record keepers. There are going to be a lot of tax problems created.

Let’s take a look here. the transition is in the middle of the year. We are doing PST for a half year. We are doing RST for a half year and we are doing HST for a half year. We have two types of accounting; accrual and cash, both need to be adjusted to suit the change. The tax returns will be now much more complicated to do … all for one freaking year….. then it will get easier. So what we have is tax problems needing soluitons for just one year.

As you know we are soon to release our new LazyBooks accounting software. So in order to simplify our clients bookkeeping, we are building transition software into the program. The lofty goal is to have this so our clients don’t have to do much more than a few clicks of a mouse to make the transition. The software will need to have date sensitive logic, which will have the ability to activate the tracking process on January 1st 2010. It will have to track and adust for numerous anomolies.

Any business that uses the industry standard accounting packages is going to have some very interesting problems. And just try and do the tax returns for 2010! Ha! this will be a tax time fiasco.

This transition to HST should have just been a cut bait. Stop the clock on December 31 2009. Start 2010 collecting HST. Do a one time accrual adjustment and Bob’s your uncle.

Somehow we have a government that is completely out of touch with reality. Show me a small business and I will show you a business that does not have the time or resources to deal with this kind of tax complexity.

While I love the HST in principle, I really frown on how this is being implemented. Not to mention, that we should be having a HST rate of less tahn 13%, simply because the transiton to HST should not be used as a tax cash grab by the government.

When this is all over and we go into the year 2011 the transition will just be a bad memory of a government gone completely Tax wild.

Herein … following… is Osler Hoskin &Harcourt LLP’s version of the new transition rules.

 Dan White

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Osler Hoskin & Harcourt LLP

D’Arcy Schieman

Canada
October 15 2009
Osler Hoskin & Harcourt LLP logo

Today, the Ontario and British Columbia governments each released “General Transition Rules” for the Ontario and B.C. Harmonized Sales Tax (HST). We view this development as a positive step towards a truly national HST, with consistency between the provinces and a reduction in the potential for double tax and tax preferences that have historically plagued businesses operating in multiple provinces within Canada. We await similar commitments from Saskatchewan, Manitoba and Prince Edward Island, as well as Québec’s final move from the nearly-parallel Québec Sales Tax. We anticipate that all of this will occur, particularly with some financial encouragement from the federal government.

This Update focuses on the General Transition Rules released by the Ontario government (Ontario Rules). The General Transition Rules for B.C. largely parallel those for Ontario. A member of the Osler Commodity Tax team would be pleased to discuss particular differences between the rules for these two jurisdictions.

I. Introduction of Hst

As announced in the 2009 Ontario Budget, the new HST will generally apply to the provision of goods and services in the same manner as GST currently applies. That means that property and services that are currently subject to the 5% GST will now generally be subject to the 13% HST. For those businesses that are currently permitted to claim input tax credits in respect of GST paid on their expenses, the HST will represent a significant cost savings over the existing Retail Sales Tax (RST). No credit was available for RST paid on taxable goods and services, whereas a full input tax credit will now be available for HST paid on taxable goods and services.

As we noted in the Osler Update of April 1, 2009 which was released at the time of the Ontario Budget, many of the most important details that will affect businesses, such as transitional rules, were not announced in the Budget. Instead, the Ontario government stated at that time that the transitional rules would be introduced subsequently, after input from an Implementation Panel that would be established to assist with the transition to the HST. Those transition rules (i.e., Ontario Rules) were announced today The Ontario Rules relate to both transitional rules for the HST that will be proposed to be enacted in the federal Excise Tax Act (ETA) and provincial measures that will be proposed to be enacted to wind down the applicable provisions of the Ontario Retail Sales Tax Act (RSTA).

In particular, the transitional rules provide guidance in determining which tax - the existing RST or the Ontario component of the HST - will apply to transactions that straddle the July 1, 2010 implementation date for the HST.

The following dates are significant under the Ontario Rules:

* July 1, 2010 - Implementation date for the HST:
* May 1, 2010 - The HST will generally apply to consideration that becomes due, or is paid without having become due, on or after this date for supplies made on or after July 1, 2010;
* October 14, 2009 - The HST will not apply to consideration that becomes due, or is paid without having become due, on or before October 14, 2009. Certain businesses and public service bodies may be required to self-assess the Ontario component of the HST on consideration that becomes due, or is paid without having become due, after October 14, 2009 and before May 2010 for property and services provided on or after July 1, 2010;
* October 31, 2010 - Any outstanding RST will become payable by this date.

II. Introduction of transition rules under the ETA

The Ontario Rules contemplate triggering HST on goods, services, intangibles and leases by reference to both the date of the particular supply and the date on which consideration is due or paid.

Tangible Personal Property

Date of Delivery and Ownership

The HST will generally apply to a supply of goods by way of sale to the extent that the goods are delivered, and ownership of the goods is transferred, to the recipient of the supply on or after July 1, 2010.

Consideration Due or Paid On or After July 1, 2010

The HST will generally apply to consideration that becomes due, or is paid without having become due, on or after July 1, 2010 for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010.

Consideration Due or Paid On or After May 1, 2010 and Before July 2010

The HST will generally apply to consideration that becomes due, or is paid without having become due, on or after May 1, 2010 and before July 2010 for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010.

Consideration Due or Paid After October 14, 2009 and Before May 2010

Persons who are not consumers - such as businesses and public service bodies - may be required to self-assess the Ontario component of the HST on consideration that becomes due, or is paid without having become due, after October 14, 2009 and before May 2010 for a supply of goods by way of sale, to the extent that the consideration is for goods that are delivered, and for which ownership is transferred, to the recipient of the supply on or after July 1, 2010.

The requirement to self-assess HST will generally apply only to:

* selected listed financial institutions;
* non-consumers acquiring property or services for consumption, use or supply otherwise than exclusively in the course of their commercial activities;
* non-consumers acquiring property or services for consumption, use or supply exclusively in the course of their commercial activities but in circumstances where the property or services will be subject to an input tax credit restriction or recapture; and
* non-consumers that use simplified procedures available under the ETA for calculating their net tax (e.g., public service bodies).

A person who is required to self-assess in these circumstances (Self-Assessor) will be required to account for the tax either:

1. in its GST/HST return for the reporting period that includes July 1, 2010, if the due date for that return is before November 2010, or
2. in any other case, in prescribed form and before November 2010.

Services

The HST will generally apply to a supply of a service to the extent that the service is performed on or after July 1, 2010. The HST will generally not apply, however, to a supply of a service if all or substantially all (90% or more) of the service is performed before July 2010. The rules described above for tangible personal property, determining tax by reference to the date on which consideration is due or paid, will with appropriate modifications generally be applied to the provision of services. There are also specific transitional rules for funeral and cemetery services, passenger transportation services and freight transportation services, which we would be pleased to discuss with interested parties.

Leases and Licences

The HST will generally apply to a supply of property by way of lease, licence or similar arrangement (including commercial leases and non-residential rental property) for the part of a lease interval that occurs on or after July 1, 2010. The HST will not, however, apply to a supply of property by way of lease, licence or similar arrangement if the lease interval begins before July 2010 and ends before July 31, 2010. The rules described above for tangible personal property, determining tax by reference to the date on which consideration is due or paid will, with appropriate modifications, generally be applied to the provision of leases and licences.

Intangible Personal Property

The HST will generally apply to consideration that becomes due, or is paid without having become due, on or after July 1, 2010 for a supply of intangible personal property by way of sale. There are also specific transitional rules for memberships, admissions and passenger transportation passes. We would be pleased to discuss these rules with interested parties.

Real Property (Other than Residential Housing)

The HST will generally apply to a supply of real property (other than residential housing) by way of sale in Ontario if both ownership and possession of the property are transferred to the purchaser on or after July 1, 2010. Detailed rules regarding the transitional rules for new residential housing are described in the Ontario Government’s Information Notice No. 2, which was issued on June 18, 2009.

Property and Services Brought into Ontario from Other Provinces

The Ontario component of the HST will generally not apply to property and services that are brought into Ontario if they are acquired by a GST/HST registrant for consumption, use or supply exclusively in the course of its commercial activities.

If a person is not engaged in commercial activities, specific rules apply. The Ontario component of the HST will generally apply on a self-assessment basis to goods that are brought into Ontario on or after July 1, 2010, and to such property that is brought into Ontario before July 2010 by a carrier where the property is delivered in Ontario to a consignee on or after July 1, 2010.

The Ontario component of the HST will also generally apply to consideration that becomes due, or is paid without having become due, after October 14, 2009 for the part of a service performed on or after July 1, 2010 (unless 90% or more of the service is performed before July 2010), if the service is supplied in a non-participating province to a resident of Ontario who acquires the service for consumption, use or supply primarily in the participating provinces. Consideration that becomes due, or is paid without having become due, after October 14, 2009 and before July 2010 for a supply of such a service will be deemed to become due on, and not to have been paid before, July 1, 2010. For consideration that becomes due, or is paid without having become due, after October 14, 2009 and before May 2010, this rule will only apply to non-consumers.

The Ontario component of the HST will also generally apply to consideration that becomes due, or is paid without having become due, on or after July 1, 2010 for intangible personal property that is supplied by way of sale in a non-participating province to a resident of Ontario who acquires the property for consumption, use or supply primarily in the participating provinces.

The Ontario component of the HST will generally apply to consideration that becomes due, or is paid without having become due, after October 14, 2009 for the part of a lease interval that occurs on or after July 1, 2010 (unless the lease interval begins before July 2010 and ends before July 31, 2010), if the lease interval is with respect to intangible personal property supplied by way of lease, license or similar arrangement in a non-participating province to a resident of Ontario who acquires the property for consumption, use or supply primarily in the participating provinces. Consideration that becomes due, or is paid without having become due, after October 14, 2009 and before July 2010 for a supply of such a property will be deemed to become due on, and not to have been paid before, July 1, 2010. For consideration that becomes due, or is paid without having become due, after October 14, 2009 and before May 2010, this rule will only apply to non-consumers.

Imported Goods

The Ontario component of the HST will generally apply to commercial goods brought into Ontario from a place outside Canada on or after July 1, 2010; however, commercial goods that are brought into Ontario by a GST/HST registrant for consumption, use or supply exclusively in the course of commercial activities of the registrant will not be subject to tax.

The Ontario component of the HST will generally apply to non-commercial goods that are imported by a resident of Ontario on or after July 1, 2010.

Imported Taxable Supplies of Services and Intangibles

The Ontario component of the HST will generally apply to consideration for an imported taxable supply of a service made to a resident of Ontario who acquires the service for consumption, use or supply primarily in the participating provinces, to the extent that the consideration is for the part of the service that is performed on or after July 1, 2010.

The Ontario component of the HST will generally apply to consideration for an imported taxable supply of intangible personal property that is made by way of lease, licence or similar arrangement to a resident of Ontario who acquires the property for consumption, use or supply primarily in the participating provinces, to the extent that the consideration is for the part of the lease interval that occurs on or after July 1, 2010.

Other Supplies

The Ontario Rules provide specific rules for Direct Sellers, Continuous Supplies, Combined Supplies, Budget Payment Arrangements, and Progress Payments/Holdbacks. We would be pleased to discuss these rules with interested parties.

III. Elimination of RST

General RST Wind-down Rules

On July 1, 2010, the existing Ontario RST will generally cease to apply to:

* a sale of goods where the goods are delivered, and ownership of the goods is transferred, to the purchaser on or after July 1, 2010;
* a sale of services to the extent the services are performed on or after July 1, 2010 (however, the RST will apply where all or substantially all of the service is provided before July 1, 2010);
* a supply of property by way of lease, licence or similar arrangement for the part of the lease or licence interval that is on or after July 1, 2010 (however, the RST will apply if the lease interval begins before July 1, 2010 and ends before July 31, 2010);
* a sale of property or a service delivered or performed on a continuous basis by means of a wire, pipeline or similar conduit or satellite or other telecommunications facility to the extent the property or service is delivered, performed or made available on or after July 1, 2010;
* goods brought into Ontario or imported by a resident of Ontario on or after July 1, 2010; and
* a sale of an admission for entry to a place of amusement on or after July 1, 2010. Notwithstanding these general RST wind-down rules, the RSTA will apply where consideration for a sale of goods, services or admissions becomes due or is paid:
* on or before October 14, 2009; or
* after October 14, 2009 and before May 1, 2010, except with respect to:

1. goods, services or admissions purchased for use exclusively in the course of commercial activities; or
2. goods, services or admissions for which the self-assessment rules in respect of consideration due or paid after October 14, 2009 and before May 1, 2010 will apply.

Any applicable RST not otherwise payable on or before October 31, 2010 will become payable on October 31, 2010.

Final RST Returns

Final RST returns will generally be required to be filed with the Ontario Ministry of Revenue on or before July 23, 2010.

Where an amount is collected or becomes payable as (or on account of) RST after June 30, 2010, the vendor will be required to account for that amount in a supplemental RST return to be filed on or before the 23rd day of the following month. All supplemental RST returns will be required to be filed no later than November 23, 2010.

RST Refunds and Rebates

Generally, refunds and rebates of RST will remain available until the earlier of the expiration of the existing time limits or June 30, 2014. The following exception will be provided where a person purchases property that is subject to RST before July 1, 2010, but returns it on or after July 1, 2010 and before November 1, 2010:

* if the property is returned and a full refund is given, the RST will be refunded;
* if an exchange is made resulting in neither a refund nor an additional payment, there will be no RST refund and the Ontario component of the HST will not be payable;
* if an exchange is made resulting in a partial refund, the Ontario component of the HST will generally not be payable on the replacement property and the purchaser will be entitled to recover the RST applicable to the amount refunded; and
* if an exchange is made resulting in an additional payment, no RST will apply but the HST will apply to the additional payment.

If the RST did not apply to property that was purchased before July 1, 2010, and it is exchanged on or after July 1, 2010, the Ontario component of the HST will apply to the full consideration for the replacement property.

If property is returned on or after November 1, 2010, no RST adjustments will be available at the point of sale. However, the purchaser may make an application for a refund of RST for tax paid in error.

Assessments, Objections, Appeals and Enforcement

Assessment, objection, appeal and enforcement provisions under the RSTA will generally apply to past transactions where the applicable limitation periods have not expired.

Transitional RST Inventory Rebate for Residential Real Property Contracts

An RST rebate will be available to provide relief with respect to the RST embedded in construction materials used in residential real property contracts that are subject to the HST.

This rebate will be available to a real property contractor for the RST paid on construction materials that are purchased or produced for the contractor’s own use, held in inventory at the end of the day on June 30, 2010 and used in a residential real property contract to which the HST will apply. The rebate will not be available with respect to inventory for which the RST is otherwise recoverable by the contractor or any other party.

IV. Development of HST legislation and policy

Further specific transitional rules are expected to be announced over the coming months. Osler’s Commodity Tax team has significant experience working with provincial and federal officials in connection with the development of legislation and policy. We would be pleased to speak with interested parties about the further implementation of the HST.

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