HST QUIZ — IS YOUR BUSINESS CHARGING IT PROPERLY?
Whether or not you’re in a Harmonized Sales Tax province, if you carry on business you need to know the rules for when to charge HST. You might be surprised!
The GST/HST rates are:
• 13% HST for a supply “made in” Ontario (generally customers located in Ontario)
• 15% HST for a supply “made in” New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland & Labrador (generally customers located in the Atlantic provinces)
• 5% GST for a supply “made in” in any other province or the territories. (Quebec has a GST-like Quebec Sales Tax, which is not part of the HST, and is discussed in the next post. Alberta and the territories have only the 5% GST. Each of B.C., Saskatchewan and Manitoba has a provincial retail sales tax that does not apply to vendors outside the province.)
Try this quiz and see how you do. Answers are at the bottom.
1. You’re in Calgary and you sell widgets. A customer in Halifax orders a widget and you ship it to her in Halifax. What rate of tax do you charge?
2. You’re in Calgary and you sell widgets. A customer in Halifax orders a widget and you “deliver” it at your warehouse in Calgary. In order to get the widget to her, you also arrange (as your customer’s agent) for a courier company to deliver the widget to her. What rate of tax do you charge?
3. You’re in Calgary and you sell widgets. A customer in Halifax orders a widget and you deliver it at your warehouse in Calgary. In order to get the widget, your customer calls a courier company to have the widget picked up at your warehouse. What rate of tax do you charge?
4. You’re an engineer based in Charlottetown. A client in Winnipeg thinks he’s invented a new device, and wants you to review his design plans to tell him if they will work. You stay at your office in Charlottetown, review the plans, write a report and bill the client. What rate of tax do you charge?
5. You’re an engineer based in Charlottetown. A client in Winnipeg thinks he’s invented a new device, and wants you to review his design plans to tell him if they will work. You travel to Winnipeg, review the plans, write a report and bill the client. What rate of tax do you charge?
6. You’re an engineer based in Charlottetown. A client in Winnipeg thinks he’s invented a new device, but is being sued by a competitor in Ontario who says your client stole the plans. They’re in litigation in the Ontario courts. You stay at your office in Charlottetown, review the plans, write an expert report for your client to use in the litigation and bill the client. What rate of tax do you charge?
7. Following #6, you travel to Toronto to testify as an expert witness in the trial, on behalf of your Winnipeg client. What rate of tax do you charge?
8. You’re a hair stylist in Edmonton. You style the hair of a client from New Brunswick who is visiting Edmonton. What rate of tax do you charge?
9. You’re a plastic surgeon in Edmonton doing facelifts (which are taxable when done solely for cosmetic reasons). You do a facelift for a patient from New Brunswick who is visiting Edmonton. What rate of tax do you charge?
10. You’re a computer expert based in New Brunswick. A business customer from a nearby town in Quebec sends you a computer to repair. You repair it and return it. What rate of tax do you charge?
HST QUIZ — THE ANSWERS
1. You charge 15%, the rate for Nova Scotia. Goods sold and shipped anywhere in Canada bear GST or HST based on the rate of tax in the destination province.
2. You still charge 15%, the rate for Nova Scotia. As long as you’re arranging the shipping, even as the customer’s agent, the same rule applies as in #1: the GST or HST applies at the rate in the destination province to which you’ve shipped the goods.
3. You charge only 5% GST, the rate for Alberta. You’ve completed delivery at your Calgary warehouse, and the customer has made her own arrangements to pick up the goods.
4. You charge only 5% GST. Services are normally taxed based on the customer’s address (subject to some exceptions), and there’s no HST in Manitoba.
5. Again you charge only 5% GST. It doesn’t matter where you perform the work. Services are normally taxed based on the customer’s address (subject to some exceptions).
6. You charge 13% HST, the rate for Ontario. A service “rendered in connection with litigation” in a province’s courts is taxed at the rate for that province. The litigation is in an Ontario court. This rule is often thought to apply only to lawyers’ services, but is actually much broader!
7. Again you charge 13% HST, the rate for Ontario, because this is a service in connection with litigation in an Ontario court. It doesn’t matter where you perform the service.
8. You charge only 5% GST, the rate for Alberta. Even though services are normally taxed based on the customer’s address, there is an exception for “personal services” performed in the presence of the individual to whom the services are rendered. Such services are taxed based on where they are performed. Since you perform the service in Alberta, the Alberta rate applies.
9. You charge 15% HST, the rate for New Brunswick. The exception for “personal services” in #8 above doesn’t apply to an “advisory, professional or consulting service”. Instead, such a service is subject to the normal rule for services, based on the customer’s address. (A physician’s service is a “professional” service.)
10.You charge only 5% GST, the rate for Quebec. There is a special rule for goods that are sent for repair, alteration, cleaning or a similar physical service. The tax applies based on the address to which the goods are returned after being repaired, altered, cleaned, etc. (If you had an office in Quebec, you would have to charge Quebec Sales Tax as well.)
If you didn’t score too well on the quiz, don’t be surprised. The rules are complex and confusing. What’s important is that you ensure that your business applies the rules correctly. Otherwise you could be in for a very costly assessment when a CRA auditor shows up to audit your business for the last several years of GST and HST.
