HST Primer for Charities and Non-Profits

April 1, 2010

Ontario and British Columbia will be “harmonizing” their provincial sales tax with the GST, effective July 1, 2010.  Instead of a 5% GST and 8% Retail Sales Tax (Ontario) or 7% Social Service Tax (B.C.), there will be a single Harmonized Sales Tax of 13% in Ontario and 12% in B.C.

Generally, HST will apply to consideration that becomes due, or is paid without having become due, on or after May 1, 2010 and before July 1, 2010 on goods and services supplied on or after July 1, 2010.  The supplier will account for HST collected in its GST/HST return for its reporting period that includes July 1, 2010 and, to the extent that the recipient is eligible to claim input tax credits (ITCs), the recipient will claim such ITCs in its GST/HST return for its reporting period that includes July 1, 2010.

Some “non-consumers” (which generally include most charities and non-profit organizations) will be required to self-assess the provincial portion of the HST on consideration that has become due, or was paid before becoming due, after October 14, 2009 and before May 1, 2010 in respect of goods and services supplied to them on or after July 1, 2010.

As with the GST, Ontario and B.C. will provide rebates of the provincial component of the tax (8% in Ontario and 7% in B.C.) to registered charities and qualifying non-profit organizations at a rate of 82% for Ontario and 57% for B.C.  The GST rebate rate for pubic service bodies will remain the same, at 50%.

Because the rebate rate for the provincial portion of the HST will differ as between the provincial and federal components of the HST, charities and qualifying non-profits will need to track the federal and provincial portions of the HST payable on their inputs.

Under the provincial sales tax regimes of Ontario and B.C., no credits or rebates are generally available to permit a charity or non-profit organization to recover tax paid.  Accordingly, charities and non-profits that currently pay Ontario Retail Sales Tax or B.C. Social Service Tax on purchases should consider deferring such purchases to July 1st or later, so as to permit a partial recovery of the provincial portion of the tax through a rebate. Conversely, to the extent possible, any purchases that are currently not taxable for RST or SST purposes but which will be taxable for HST purposes (e.g. most services) should be purchased before July 1st.

The Canada Revenue Agency (CRA) administers the HST on behalf of the federal and provincial governments.  To assist charities with their GST/HST compliance, the CRA recently released (in March 2010) two new GST/HST Information Sheets.  GST/HST Info Sheet GI-066 explains how a charity calculates the net tax to be reported in its GST/HST return.  GST/HST Info Sheet GI-067 provides basic information on some of the most common issues relating to how the GST/HST applies to charities.  Both of these publications can be found on the CRA’s website at www.cra-arc.gc.ca. 


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