Do businesses lose the PST exemption when the HST comes in? Anyone know how this is supposed to work for business?
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From my understanding it will be operated the same way GST is now.
You pay the GST/PST on your order from your supplier and collect GST/PST when you sell to your customer. For example you pay $50 in taxes on your initial order and then you collect $75 when you sell to your client - you deduct what you have paid from what you collected and submit the balance to the Revenue department ($25).
So in a fact yes and no would be an answer to the question
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From my understanding it will be operated the same way GST is now.
You pay the GST/PST on your order from your supplier and collect GST/PST when you sell to your customer. For example you pay $50 in taxes on your initial order and then you collect $75 when you sell to your client - you deduct what you have paid from what you collected and submit the balance to the Revenue department ($25).
So in a fact yes and no would be an answer to the question
+1
You are not going to lose money and there is only one remittance form to submit per period. The HST (harmonized sales tax) is not an expense per se. All you have to do is collect HST from the clients and pay the HST to your suppliers. At the time of remittance (monthly, quarterly, semi-annually, or yearly-whatever is set up with Revenue Canada) you pay the difference. In some cases, you may end up with a refund if the paid HST is greater than the collected HST. It's very simple.
Do businesses lose the PST exemption when the HST comes in? Anyone know how this is supposed to work for business?
In one word, yes.
No PST means no PST exemption, and HST is in pretty much everything, whether it is goods or services. That is why they want to stick us with it, because it lets them score 8% more without the muss or fuss of inventing a new tax that people would be outraged with.
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No PST means no PST exemption, and HST is in pretty much everything, whether it is goods or services. That is why they want to stick us with it, because it lets them score 8% more without the muss or fuss of inventing a new tax that people would be outraged with.
Please get your facts straight. From a business perspective, it is much easier dealing with GST than it is with PST and PST exemption is/was one of the most misused things going.
As I understand it, both will fall into the same method as we currently use for GST. A business pays HST on their expenses, collects HST from their clients on their invoices, and remits the difference to the government. This method will result in a large 'savings' with the new HST.
An example, I want to purchase one of the nice new shiny Mac Minis with the OS X Server option. Today, I pay $1099, plus 8% RST ($87.92), plus 5% GST ($54.95). My total expenditure is $1241.87.
I sell training services to a client for $2000. I charge them GST which means that I collect $2100. I submit $45.05 to the Federal government for GST. After my purchase and my payment, I'm left with $813.08.
If this was a year from today. I'd still pay $1241.87 for my Mac Mini Server, but I'd charge my client $2260. I'd submit $117.13 for my HST filing. That leaves me with $901.
I'm ahead $87.92 which I could never claim before.
Before any of you say something about being RST (PST) Exempt, the rules are only for the purchase of Raw Materials or items for resale, not for expenses to run the business.
If I'm buying a Mac Mini and reselling it, I can claim exemption on the Mac Mini. But if I am using it in my own office, under the current rules I can't claim it to be RST Exempt.
My question about the coming HST - it's coming next year in BC not only in the centre of the universe - is about whether the low end exemption that currently applies with the GST will carry forward to the HST.
I know many self-employed artists who collect PST when they sell their work, but don't collect GST, because they are under the CRA low end cutoff for gross sales of $30,000 annually. There is no such exemption under PST, apparently you are legally supposed to collect it and remit even if you have a garage sale - although nobody does.
For very small, part-time or micro-business and self-employed people in BC at least, PST is much simpler to deal with compared to the GST. Doing the PST return takes all of 5 minutes if one has a simple business. True one doesn't get the same level of exemptions for paying out the PST on not-for-resale business expenses, but for smaller dealers (those that would be below $30K) that's not a great amount. If one buys things for resale dealing with the PST is easy, the person just tells the person he's buying it from their PST number and then they are exempt.
I know many people who are not looking forward to dealing with the much more complex rules and paperwork around the GST-HST. When I first started collecting it I spent a lot of time trying to figure out how best to deal with it in my accounting. For me now it won't be a big deal.
For those in service businesses that will suddenly be whacked with an additional 7% (in BC) that they have to collect on top it will hurt sales. For larger businesses it's an advantage because of the opportunity for greater ITCs that can be claimed. That's why it's the larger of small businesses and the corporate crowd cheerleading for the HST. But with the notable exception of the food service industry and the trades, both who supported Gordon Campbell in a huge way in his re-election last spring. They feel that nagging got-knifed-in-the-back feeling.
I think this is a tax grab on the part of the BC government - I can't speak for Ontario. Costs significantly reduced for big players, more tax paid out across the general population and a greater amount in the lower income levels. Just in time to help pay for the big 2010 Olympic party bills which will come due. Campbell is getting a big pile of cash from Harper to make the change and his government will reap the windfall of all those extra service businesses, trades and food industry businesses that will be funnelling an extra 7% his way when they didn't have to collect those funds before.
If he wanted to make it truly revenue neutral to the taxpayer, then the provincial share should have been dropped to account for the extra money. So maybe the total HST would have been 9 or 10% instead of 12%. That would be fair enough IMO.
But Campbell "claims" that part of the deal that Harper offered was that there could be no reduction in the provincial share. Sounds fishy to me - why should the feds have anything to say about that? Of course Campbell also claimed during the election last spring that his government had absolutely no intention of going to the HST even while his ministers were at the same moment having meetings with the feds on how to accomplish this.
The PST in BC used to be called the Social Service Tax and was only there to help fund social programs for the less well off. That's gone away now, they took that name away years ago and it was all funnelled into general revenues, higher MLA salaries, Olympic parties for the privileged, etc. Now I guess it's completed its transition.
Before any of you say something about being RST (PST) Exempt, the rules are only for the purchase of Raw Materials or items for resale, not for expenses to run the business.
If I'm buying a Mac Mini and reselling it, I can claim exemption on the Mac Mini. But if I am using it in my own office, under the current rules I can't claim it to be RST Exempt.
RST is supposed to be only applied to the last link in the sale chain applied only to the final sale not at every step like GST.
You are missing one RST rule - you are allowed to purchase equipment and tools RST exempt IF you are using it to manufacture products or goods for sale. This would include your Mac Mini as you use it to train clients as it is then a tool. If you use it for office tasks such as bookkeeping or internal use, then it is not.
I use my tax exemption for my computer and camera equipment as I use them to create products for my clients, where the end product's have RST applied. If you sell your equipment, you are supposed to collect RST when selling and submit the tax accordingly.
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RST is supposed to be only applied to the last link in the sale chain applied only to the final sale not at every step like GST.
You are missing one RST rule - you are allowed to purchase equipment and tools RST exempt IF you are using it to manufacture products or goods for sale. This would include your Mac Mini as you use it to train clients as it is then a tool. If you use it for office tasks such as bookkeeping or internal use, then it is not.
I use my tax exemption for my computer and camera equipment as I use them to create products for my clients, where the end product's have RST applied. If you sell your equipment, you are supposed to collect RST when selling and submit the tax accordingly.
No, I'm afraid you are mistaken. This is one of the many areas where the RST Exemption rule is misunderstood or misused.
From Guide 650:
"Computer program developers can qualify as manufacturers provided certain conditions are met. Qualifying manufacturers may purchase processing materials and manufacturing equipment (e.g., computers, computer programs, electronic storage, etc) used primarily (i.e., more than 50 per cent) and directly in the development of taxable computer programs exempt from RST.
To qualify as a manufacturer, developers must produce computer programs:
• for sale to others, and sales of such programs must exceed $5,000 in a fiscal year, or
• for their own use, and their cost to produce such programs must exceed $50,000 in a fiscal year.
For more information about manufacturing, please refer to RST Guide 400 - Manufacturers."
If you are a company that is developing a software application that is going to be resold (i.e. a boxed copy sold off the shelves in a store), you may be eligible. If you are training someone on the use of a program that you are reselling, but didn't develop, you are not exempt.
I know that this gets misused regularly. The new HST rules will make this much easier and take away much of the confusion.
No, I'm afraid you are mistaken. This is one of the many areas where the RST Exemption rule is misunderstood or misused.
From Guide 650:
"Computer program developers can qualify as manufacturers provided certain conditions are met. Qualifying manufacturers may purchase processing materials and manufacturing equipment (e.g., computers, computer programs, electronic storage, etc) used primarily (i.e., more than 50 per cent) and directly in the development of taxable computer programs exempt from RST.
To qualify as a manufacturer, developers must produce computer programs:
• for sale to others, and sales of such programs must exceed $5,000 in a fiscal year, or
• for their own use, and their cost to produce such programs must exceed $50,000 in a fiscal year.
For more information about manufacturing, please refer to RST Guide 400 - Manufacturers."
If you are a company that is developing a software application that is going to be resold (i.e. a boxed copy sold off the shelves in a store), you may be eligible. If you are training someone on the use of a program that you are reselling, but didn't develop, you are not exempt.
I know that this gets misused regularly. The new HST rules will make this much easier and take away much of the confusion.
Nope ... you are mistaken
Quote from RST Guide 520, June 2009
Manufacturing
Manufacturing Exemptions
Designers may qualify as manufacturers provided that their:
total sales of manufactured tangible designs sold to others exceed $5,000 in a fiscal year, or “manufactured cost” of taxable designs produced for own use exceeds $50,000 in a fiscal year.
Own use operations may include:
the production and placement of a poster on a billboard
the production and placement of an ad on a bus kiosk
the manufacture and installation of signage as real property.
Once a threshold has been met, manufacturers may purchase production equipment and processing materials which are used primarily (more than 50%) and directly in the manufacture or production of goods, exempt from Retail Sales Tax (RST) by providing a valid PEC to their supplier at the time of purchase.
Qualifying equipment and materials may include:
computers
design software
digital cameras
graphic tablets
ink cartridges
photographic paper
plates
printers
scanners
transparencies
General office supplies such as tables for computers and printers, stationery, filing cabinets, chairs, calculators, paper trays and telephones are taxable.
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