Tuesday, October 5, 2010

HST- Why some businesses do not charge it?

Here is one question  from one of my readers.
Question from Pat:
I am a small business owner that collected GST so now HST. There are other small businesses that didn’t collect GST, now don’t collect HST. So potentially sales could decrease for me as we could be side by side, I charge HST and they don’t, so customer saves 13% by buying from them. This isn’t fair. Any words of wisdom? 
You have not indicated what products or services you sell. Therefore I have provided generic answer.
There can be three reasons
A. The supplier is small supplier. Here is the description of small supplier from CRA website.
You are a small supplier and do not have to register if you meet one of the following conditions:
·         you are a sole proprietor and your total revenues from taxable supplies (before expenses) from all of your businesses are $30,000 or less in the last four consecutive calendar quarters or in any single calendar quarter;
·         you are a partnership or a corporation and your total revenues from taxable supplies (before expenses) are $30,000 or less in the last four consecutive calendar quarters or in any single calendar quarter;
·         you are a public service body (charity, non-profit organization, municipality, university, public college, school authority, or hospital authority) and your total revenues from taxable supplies from all of the activities of the organization are $50,000 or less in the last four consecutive calendar quarters or in any single calendar quarter. A gross revenue threshold of $250,000 also applies to charities and public institutions.
B. If the product is a zero rated or exempt supplies, then the business does not to charge HST. Check whether the product you are supplying falls under these catergories.

Check below the list of zero rated and exempt supplies from CRA website below.

Zero-rated supplies
Some supplies are zero-rated under the GST/HST – that is, GST/HST applies at a rate of 0%. This means that you do not charge GST/HST on these supplies, but you may claim input tax credits for the GST/HST paid or payable on purchases and expenses made to provide these supplies.

Examples of supplies taxable at 0% (zero-rated) include:
  • basic groceries such as milk, bread, and vegetables;
  • agricultural products such as grain, raw wool, and dried tobacco leaves;
  • most farm livestock;
  • most fishery products such as fish for human consumption;prescription drugs and drug-dispensing services;
  • medical devices such as hearing aids and artificial teeth;
  • exports (most goods and services for which you charge and collect the GST/HST in Canada, are zero-rated when exported); and
  • many transportation services where the origin or destination is outside Canada; .
Exempt Supplies
Some supplies are exempt from the GST/HST - that is, no GST/HST applies to them. This means that you do not charge the GST/HST on these supplies of property and services, and you do not claim input tax credits.
Examples of exempt supplies include:
  • a sale of housing that was last used by an individual as a place of residence;
  • long-term rentals of residential accommodation (of one month or more) and residential condominium fees;
  • most health, medical, and dental services performed by licensed physicians or dentists for medical reasons;
  • child-care services, where the primary purpose is to provide care and supervision to children 14 years of age or under for periods of less than 24 hours per day;
  • most domestic ferry services;
  • legal aid services;
  • many educational services such as:
    • courses supplied by a vocational school leading to a certificate or a diploma that certifies the ability of individuals to practise or perform a trade or a vocation, or
    • tutoring services made to an individual in a course that follows a curriculum designated by a school authority;
  • music lessons;
  • most services provided by financial institutions such as lending money or operating deposit accounts;
  • arranging for and the issuance of insurance policies by an insurer and the arranging for the issuance of insurance policies by insurance agents;
  • most goods and services provided by charities; and
  • certain goods and services provided by non-profit organizations, governments, and public service bodies such as municipal transit services and standard residential services such as water distribution.
C. The business is neither A or B  above and if they are not collecting or remitting HST, If CRA audits them, they are still liable for the HST and the business has to pay it even though they have not collected it. CRA may even assess GST for the prior years based on the audit.

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