With the introduction of HST in BC and Ontario to take place July 1st, 2010, eCommerce merchants have their work cut out for them to make sure they understand their requirements and their sites are ready.
At first glance, it does not seem like a big deal. 5% GST and 7% PST is all rolled up into a 12% HST in BC and the 8% PST in Ontario is rolled up with GST for their 13% HST. Businesses submit one set of forms and government and business save millions in administrative hassle as PST fades into the background.
HST is a federal tax so all eCommerce merchants operating in Canada must start collecting the taxes appropriate for the destination. For example, a retailer based in Alberta now has to collect HST for orders shipping to BC and Ontario. This is easy enough and is the same as the procedures for the HST that has been in place in the Atlantic Provinces for years.
So why the fuss? Point of Sale HST Rebates
Both Ontario and BC have created HST exceptions that apply to books, children’s clothing feminine hygiene products, and a few other products. These Point of Sale rebates apply to products that have until now been PST exempt and reduce the tax due on these products to 5%. (My wife would like me to point out that if the government had a spine they would have eliminated the HST from feminine hygiene products all together. But I digress….)
You can learn more about the Point of Sale Rebates at the CRA site.
These exceptions make life interesting. If all you sell are children’s products then in your physical store you keep charging 5% and everyone is happy. But on the web, the shipping portion is subject to the full HST. So if you sell $20 of books with $5 of shipping, you collect 5% HST on the books and 12% on the shipping.
|Books|| $ 20.00|
|Shipping|| $ 5.00|
|5% HST|| $ 1.00|
|12% HST|| $ 0.60|
|Total|| $ 26.60|
It gets more complex if you sell a mixture of exempt and non-exempt products.
All merchants operating in Canada have 2 months left to get ready for this. You will need to set up a new tax rate and apply exemptions as appropriate. I'll be posting more in the next few days as we work through our approach.