Ontario Harmonized Sales Tax (OHST)

HST • What is it?• Terminology • Rebates• How to calculate• Exceptions• Impact on Ryerson• Important dates• Transition rules • Additional Resources

OBJECTIVES

OHST – What it is ?

• Under the previous tax regime we had 2 taxes:– GST (5%) a federal tax which applied to Goods & Services,– PST (8%) a provincial tax which generally applied to Goods

only.

• Ontario’s version of the Harmonized Sales Tax (HST) is the OHST and is a harmonization of the:8% Provincial Retail Sales Tax (Provincial Component), AND 5% Goods and Services Tax (Federal Component) to form the the new

combined OHST tax rate @ 13%.

• OHST becomes effective July 1st 2010.

• OHST will be administered federally by the Canada Revenue Agency (CRA)

OHST – What it is? continued

• There are 2 components of the new OHST tax regime –The federal component of the new OHST is 5%.

–The provincial component of the OHST is 8%.

Combined they are the new OHST which is sometimes referred to as the OVAT (Ontario Value Added Tax)

OHST – Terminology

• The basis of the new OHST is the GST rules and as such, the OHST will now apply to both goods and services - similar to the existing GST.

• The OHST will be shown as one tax

OHST – Rebates

• Universities will receive a 67% rebate on the federal component of the OHST.

• Universities will receive a 78% rebate on the provincial component of the HST.

• Combined the rebate rate will be approximately 73.77% of the 13% tax paid.

OHST – Rebates

Commercial Operations (ie: Bookstore)• If all sales of a Cost Centre is taxable, the rebate/input

tax credit that applies to the cost centre will be 100%.

Blended Operations• If a Cost Centre contains both taxable and non taxable revenue,

then the rebate will be calculated at a combined rate. E.G. 50% non-taxable and 50% taxable– Rebate rate will be the average of 73.77% and 100% or 86.88%

How to calculate OHST

OHST – Delivery after June 30, 2010

$100.00 Cost

$ 5.00 federal component OHST

$ 8.00 provincial component OHST

$113.00 Sub Total

($3.35) federal component rebate at 67%

($6.24) provincial component rebate at 78%

$103.51 Net Total Cost

OHST – Exceptions

OHST should not be charged on:

• the sale of goods or services exported outside Canada,

• to some Provincial Governments and their recognized bodies (assumes certification provided),

• Items sold for nominal amounts i.e. amounts equal to or less than the direct cost of item purchased less OHST rebate.

OHST – Exceptions

• Insurance premiums – No Federal Component – 8% Provincial Component (no rebate available)

• Books – Federal Component at 5% (Point of sale rebate available)

– No Provincial Component

OHST – Impact On Ryerson

• Since OHST generally follows GST rules, then items that were previously PST exempt will now incur the full OHST. This includes:

• Research Equipment• Gas and Fuel• Construction• Services

• Determination of tax application is based on delivery of goods &/or services, not when purchased.

Important Dates

May 1, 2010• vendors must show OHST on invoices for goods or services to be

delivered after July 1, 2010

July 1, 2010• OHST goes into effect.

• **** Please note delivery date of goods and/or services during the transition period . You will be asked for this information when approving invoices via Markview *******

OHST – Transition Rules

Services– Effective May 1, 2010 OHST must be charged for that portion of

any taxable services performed on or after July 1, 2010

(Remember: Most services will be OHST taxable for the University).

– Exception - if 90% or more of the service is performed before July 2010 no OHST is to be charged

OHST – Transition Rules

Goods

• Effective May 1, 2010 OHST must be charged for taxable goods sold with delivery and transfer of ownership occurring on or after July 1, 2010

OHST – Transition RulesScenario 1: Sale before May 1, 2010

On April 3, 2010, University sells Lab Supplies and delivers the supplies to the students on May 11, 2010. What taxes apply?

Answer:As the delivery occurs before July 1, 2010, the OHST does not apply to these sales, but PST and GST continue to apply.

OHST – Transition Rules

Scenario 1A: Sale between May 1 & June 30, 2010

On May 3, 2010, University sells Lab Supplies and delivers the supplies to the students on May 11, 2010. What taxes apply?

Answer: As the Lab Supplies are delivered to the Students

before July 1, 2010, the OHST does not apply to these sales but PST and GST will apply. If delivery had taken place on or after July 1, 2010, OHST would have applied.

OHST – Transition Rules

Scenario 1B: Sales on or after July 1, 2010– On July 3, 2010, University sells Lab Supplies and

delivers Supplies to students on July 3, 2010. What taxes apply?

Answer:– As the Lab Supplies are delivered to the Students

on/after July 1, 2010, OHST applies to these sales. PST and GST do not apply.

OHST – Transition Rules

Scenario 2: Sale before May 1, 2010The University sells a 4-month athletic membership on January 4, 2010, which expires on April 30, 2010. The full membership fee becomes due at the time of sale. Which taxes apply?

Answer:As the membership ends before July 1, 2010 the OHST does not apply to this sale. As memberships are PST exempt, only GST will apply.

OHST – Transition Rules

Scenario 2A: Sale between May 1 and June 30, 2010– University sells a year-long athletic membership on May 1, 2010

which expires on April 30, 2011. The full membership fee becomes due at the time of sale. Which taxes apply?

• Answer:– Less than 90% of the membership period is before July 2010,

therefore the membership fee is prorated for purposes of charging OHST. The OHST does not apply to the portion of the membership fee relating to the period before July 2010 – memberships are PST exempt so only GST applies to May & June period. However, the OHST applies to the portion of the membership fee relating to the period on or after July 1, 2010 (i.e. 10 of the 12 months).

OHST – Additional ResourcesOHST – Additional Resources

Canada Revenue Agency:http://www.cra-arc.gc.ca/E/pub/gi/notice247/README.html

Ontario Ministry of Revenue: http://www.rev.gov.on.ca/en/notices/hst/03.html

Questions?