Harmonized Sales Tax
July 5, 2010
SUBJECT: Harmonized Sales Tax
Dear colleagues,
Effective July 1, 2010, Ontario and British Columbia join the Maritime Provinces in adopting a single value-added Harmonized Sales Tax (HST) which contains both a federal and provincial portion. The provinces now participating in HST are:
|
Ontario |
HST @ 13% (new, effective July 1, 2010) |
|
British Columbia |
HST @ 12% (new, effective July 1, 2010) |
|
Nova Scotia |
HST @ 15% (increased from 13%, effective July 1, 2010) |
|
New Brunswick |
HST @ 13% (rate in effect since January 1, 2008) |
|
Newfoundland & Labrador |
HST @ 13% (rate in effect since January 1, 2008) |
Here are the general rules for determining which taxes are applied by Canadian providers:
- If the good or service is consumed in Quebec, the GST is charged. For Quebec entities, QST is charged or self-assessed.
- If the good or service is consumed in HST-participating provinces, HST (at that province’s rate) is applied. No additional federal or provincial tax is applicable.
- During the transition period, the appropriate tax and rate is applied based on the date the good or service was rendered (not the billing date)
What does this mean to McGill, as both a consumer and provider of goods and services?
FOR ISSUING TAXABLE INVOICES TO EXTERNAL CUSTOMERS:
If you invoice for a good or service rendered July 1, 2010 and thereafter, and the good or service is consumed in an HST-participating province, you must bill the HST at that province’s rate. Your invoice should show the rate of HST being charged, along with the usual GST tax registration number.
When issuing a refund, sales tax is to be calculated at the same rate that was charged when the original supply was paid or invoiced. Thus if a customer is refunded after July 1st for an invoice dated prior to July 1st, they are to be refunded the tax and rate they were originally invoiced at.
Banner is now updated with additional Sales Tax Groups to reflect these new HST rates for the billings processed by Central Accounts Receivable and to accommodate the direct cash receipt form FGADCSR. Be sure to select a revenue ACCOUNT code starting with ‘5’ and has an ‘H’ at the beginning of its description, e.g. When charging Ontario HST for a conference being held in Toronto, 500662 (H1 ON Registration/membership revenue) is an appropriate selection to match the new tax group of MCH1 entitled “McGill sale – Ontario HST taxable”.
|
Tax Group |
Tax Group Title |
Select the appropriate revenue ACCOUNT starting with ‘5’ |
|
MCH1 |
McGill sale – Ontario HST taxable |
Account description must start with ‘H1’ |
|
MCH2 |
McGill sale - BC HST taxable |
Account description must start with ‘H2’ |
|
MCH3 |
McGill sale-Nova Scotia HST taxable |
Account description must start with ‘H3’ |
|
MCH4 |
McGill sale-New Brunswick HST taxable |
Account description must start with ‘H4’ |
|
MCH5 |
McGill sale-Newfoundland/Labrador HST taxable |
Account description must start with ‘H5’ |
See for a full list of Revenue Account Codes, including the ones newly created for HST taxable items.
Units responsible for cash registers, POS systems, e-commerce solutions, and any other transaction feeds must ensure that their billing systems are updated and can support these new rates.
FOR THE PAYMENT OF INVOICES FROM VENDORS:
If you consume a good or service on July 1, 2010 and thereafter, and the good or service is consumed in an HST-participating province, you will be billed the HST at that province’s rate. The invoice you pay must show the rate of HST being charged.
The central Accounts Payable Office will be reviewing all invoices during the transition period to ensure that suppliers charge the appropriate taxes. If there is an error with the GST charged, the supplier will be contacted to re-issue the invoice.
It is important to note that the normal GST rebate rates will be applied to HST amounts.
Below is a chart showing two scenarios of an Ontario vendor billing McGill for a good at $100. This example assumes a GST rebate rate of 67% which is the rate for funds with no commercial activity.
If McGill consumed the good in Quebec:
| Purchase Price x Rate | Taxes Paid x Rebate Rate | Rebates Claimed | Net Taxes Paid | TAX RATE NET OF REBATES | |
| GST: | $100.00 x 0.0500 = | $5.00 x 67% = | $3.35 | $1.65 | 1.650% |
| QST: | $105.00 x 0.0750 = | $7.88 x 47% = | $3.70 | $4.17 | 3.975% |
|
|
|||||
| $5.82 | $5.625% | ||||
If McGill consumed the good in Ontario:
| Purchase Price x Rate | Taxes Paid x Rebate Rate | Rebates Claimed | Net Taxes Paid | TAX RATE NET OF REBATES | |
| HST: | $100.00 x 0.1300 = | $13.00 x 67% = | $8.71 | $4.29 | 4.290% |
|
|
|||||
| 4.290% | |||||
Note: Since most purchased goods and services are consumed in Quebec, Banner is set to default a GST/QST calculation. Any HST situations will result in the differential tax amount posted as ‘additional amount’ on the invoice transaction. A manual rebate adjustment will be done by Accounts Payable for material amounts.
FOR PERSONAL REIMBURSEMENTS VIA EXPENSE REPORT:
Travel to a participating province will result in HST charges on receipts (e.g. 12% HST on registration fees for a conference in British Columbia). To receive the appropriate rebate, the claimant needs to do the following when preparing their Expense Report in Minerva:
- For receipts of items consumed in the participating province, select the purchasing location “Canada not Quebec” (already a standard practice).
- The system will automatically calculate the GST @ 5% as included on the receipt in the ‘GST/HST’. The claimant should override the amount with the true HST charge per their receipt in order to be eligible for the highest possible tax rebate.
Should you have any questions regarding the HST changes, please contact our sales tax expert, Abiola Arthur (Abiola.arthur [at] mcgill.ca or local 6117).
Regards,
Cristiane Tinmouth
Controller