COVID-19: Sales tax and tax controversy updates and insights

April 2, 2020 | Ron Choudhury, Marie-Hélène Tremblay, Neil Gurmukh, Molly Luu, Colleen Ma

Businesses of all sizes are scrambling to adapt to the constantly changing world in which we find ourselves. Owners are worried about cash flow. Routine business operations are migrating online. New revenue streams are being explored. Meanwhile, we are inundated with continual federal, provincial, and municipal government announcements daily. In this new twisted reality where the sand shifts beneath us by the hour, this bulletin will deliver highlights about recent sales tax developments and insights.

Sales tax relief for businesses

Last week, GST/HST remittance relief for businesses was announced. Similar measures were announced for QST. Monthly, quarterly, and annual filers can defer to June 30, 2020, GST/HST and QST payments, including installment payments, that were otherwise due in March, April, or May. However, businesses are still required to file GST/HST and QST returns on time. B.C., Saskatchewan, and Manitoba have also announced provincial sales tax relief measures. Businesses that take advantage of this relief should be mindful that these measures only defer tax, not eliminate it. The CRA has the ability to assess directors personally for unremitted GST/HST and Revenu Québec has the same ability for GST and QST.

Moving to virtual business activities

In order to promote social distancing and stem the spread of COVID-19, many businesses are embracing technology to provide services remotely instead of in‑person. Providing services remotely can complicate the determination of whether or not to charge GST/HST (or provincial sales tax) and the rate that should be charged.

Sales tax documentation – constant vigilance

Keeping up with paperwork and accounting controls may be challenging while teams are working remotely. However, businesses should remain vigilant in issuing or retaining sales tax-related documents. This includes issuing/receiving proper credit notes and receiving/retaining information required to claim an input tax credit.

Expanded BC PST registration measures postponed

Measures announced in BC Budget 2020 relating to the expanded PST registration requirements for Canadian and foreign businesses are postponed until further notice.

Ontario limitation periods suspended

In trying to accommodate the unique circumstances which have arisen, the Ontario government has suspended limitation periods and any period of time within which any step must be taken in any proceeding or intended proceeding in Ontario. While this does apply to some Ontario administered taxes, like Non-Resident Speculation Tax or Land Transfer Tax, it does not apply to income tax and GST/HST, which is federally administered.

Tax Court proceedings held in abeyance

Appeals before the Tax Court of Canada will be held in abeyance. The Court is closed until May 1, 2020, and that decision will be reviewed on April 14, 2020.

CRA audit and collection activities suspended

The CRA announced that collection activities on new debts will be suspended until further notice. No new post-assessment GST/HST or income tax audits will be initiated, and most objections will temporarily be held in abeyance. For objections that were due March 18, 2020, or later, the deadline to file was effectively extended to June 30, 2020. However, consideration should be given to filing objections well before this date to get ahead of the inevitable rush.

If you are concerned about your sales tax obligations during this unprecedented time, please reach out to a member of the Miller Thomson LLP Sales, Commodity, and Indirect Tax Group. We will continue to post sales tax updates and insights to the Miller Thomson LLP COVID-19 Resources page.

 

Miller Thomson is closely monitoring the COVID-19 situation to ensure that we provide our clients with appropriate support in this rapidly changing environment. For articles, information updates and firm developments, please visit our COVID-19 Resources page.

Disclaimer

This publication is provided as an information service and may include items reported from other sources. We do not warrant its accuracy. This information is not meant as legal opinion or advice.

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