1. My supplier didn’t charge me HST but he should have. Am I liable to pay it?
Assuming that the supplier is not a “small supplier” (i.e. the supplier should have charged you HST), then if the vendor does not collect the tax, then purchaser is still required to pay it. Although the purchaser is not required to pay the amount to the Receiver General if it is required to be collected by another person under section 221, paragraph 296(1)(b) allows the the CRA to assess the purchaser for tax payable. In reality, the CRA rarely assesses a purchaser in these circumstances
2. If my supplier charged me HST but it was later discovered that he did not remit it to the government, do I have to pay the HST?
Where the vendor collects the tax, the vendor does so as agent of Her Majesty in right of Canada. If the vendor collects the tax from the purchaser but does not remit it, the purchaser is not liable to pay the tax a second time, absent some collusion with the vendor. Once a purchaser has paid GST to a vendor, the purchaser’s obligation to pay the tax has been fulfilled. The logic here is that when payment of the tax is made by the purchaser to the vendor, payment to the government is being made, through its agent, the supplier.
3. Are there any purchasers who do not have to pay HST?
There are a number of classes of recipients that are effectively not subject to GST. These include:
1. Status Indians on reserves.
2. The Governor General.
3. Certain international organizations and foreign diplomats. They must pay GST. Their exemption is then handled by rebate or remission order
4. Non-residents receiving exports of goods and services that are either zero-rated or outside the scope of the GST.
5. Visitors to Canada who pay GST but may be eligible for a rebate.
7. Farmers, in respect of certain equipment purchases.
Generally, aside from these cases (some of which involve paying the GST up front and receiving a rebate), there are no exemptions based on who the purchaser is.
4. My Customer would like to be invoiced in U.S. Dollars. How much HST do I charge?
You should charge HST at the appropriate rate (e.g. 13% in Ontario) on the amount of the invoice. At the end of the month, convert the amount of U.S. Dollar denominated HST into Canadian dollars and incorporate that amount in to your HST return
5. Do I have to charge HST on inter-corporate management fees?
Companies that are exclusively involved in commercial activities fully recover the HST they pay and therefore it seems “unnecessary” to charge HST to a related company. However, partly to support the operational structure of the Excise Tax Act (i.e. which does not utilize administratively burdensome Purchase Exemption Certificates, for example) and given the fact that not all companies recover all of the HST they pay (e.g. holding companies and the MUSH sector), it is important to continue the practice of charging HST, even on intercompany transactions.
Under certain circumstances, two “closely related” companies can elect to not charge HST on transactions between themselves.
6. Which rate do I charge on inter-provincial transactions?
Given the fact that several of the provinces have “harmonized” their respective sales tax legislation with the federal Excise Tax Act and that each province has a “provincial component” included in “its” rate, we are faced with a harmonized system of rules but with differing rates.
Accordingly, it is sometimes difficult to determine which tax rate to charge a customer. For goods, it is easier. The GST/HST rate associated with the province to which the goods are being shipped is the rate that should be charged.
For services and intangibles, it is recommended that you consult Technical Information Bulletin B-103 – Place of Supply Rules as there are many exceptions and special case scenarios that need to be addressed.
7. We sell gift packs with taxable and zero-rated goods? What rate do I charge?
Using a simple example, if the “gift pack” consists of one taxable item and one zero-rated item, then if the taxable item represents greater than 10% of the total price (when priced individually, on a weighted average basis), then HST applies on the entire purchase. If the taxable item represents less than 10% of the value of the gift pack, then the entire package is zero-rated.
8. My company is a Canadian holding company. We hired a consultant from New York. Do I have to self-assess HST on this service?
If your holding Company is not in commercial activity and it does not recover HST on its purchases as a result, then the Company has to self-assess HST on the fair value of the service (i.e. the imported taxable supply). It does not have the ability to recover the self-assessed HST. The HST becomes an additional cost even though the consultant resides outside of Canada. This ensures the fairness of the system since a Canadian consultant should not be disadvantaged for having to charge HST to a customer that cannot recover its HST just because the Canadian consultant is registered for HST and the foreign vendor is not registered to charge HST.
9. Can I charge HST on the entire invoice and make the “rounding” calculation at that point?
If your customer is buying more than one item and tax applies at the same rate on all items, you can total the prices of all taxable supplies of goods and services, calculate the GST/HST payable, and then round off the amount. However, be careful when your customer purchases a combination of separate items, some of which are taxable and some of which are zero-rated. In those, situations, the tax should be calculated on only the taxable items. The rounding can occur at the item level or based on the total of all of the taxable items.
10. With the phasing out of the Penny, I heard that the price I pay for something could be different depending on whether I use cash or credit, debit or some other payment method. Is this true?
As pennies exit circulation, cash payments or transactions only will need to be rounded, either up or down, to the nearest five-cent increment. Only cash transactions require rounding. Cheques and transactions using electronic payments—debit, credit and payments cards—do not need to be rounded, because they can be settled electronically to the exact amount.
For cash settlements only, the following illustration demonstrates how rounding will work.