Harmonized Sales Tax (HST) - Transition
The Province of Ontario and the Province of British Columbia (B.C.) have each signed a Memorandum of Agreement (MOA) with the Government of Canada that provides the framework for the introduction of a harmonized sales tax (HST) in Ontario and in B.C. The proposed HST would come into effect in both provinces on July 1, 2010 at a rate of 13% for Ontario and 12% for B.C. Subject to legislative approval, the Ontario and B.C. HST would use the same tax base and structure as the GST. The MOAs also allow Ontario and B.C. to designate a limited number of point-of-sale rebates for the provincial component of the HST and implement for a transitional period (which may be up to eight years) certain restrictions on allowable business input tax credits. The HST in Ontario and in B.C. would be administered by the CRA.
NewViews Accounting Software
On July 1, 2010, the "Harmonized Sales Tax" (HST) will come into effect in an additional two provinces: Ontario & British Columbia (B.C.) (called the "participating provinces", or "PP"). Under this new tax system, the Provincial Sales Tax and Federal GST in these provinces are combined into one tax. It is called a "harmonized" tax because, in most cases, the HST will be applied to all goods and services formerly subject to GST, even though some items may have been exempt from PST.
On April 1, 1997, the "Harmonized Sales Tax" (HST) came into effect in the first three provinces: Newfoundland & Labrador, Nova Scotia, and New Brunswick.
How Does the HST Affect Businesses and their NewViews Books?
The HST makes things simpler for businesses in the participating provinces because it means an end to worrying about whether a good or service is subject to one or both taxes. Also, businesses may claim input tax credits on HST just as they did on GST; a system that has proved to be quite simple. More good news is the fact that the tax returns for HST will be the same as GST, and no new accounts or reports will be required to manage HST. An existing NewViews GST report and accounts are all that are required.
The problems result from the fact that sales in the five provinces are subject to 13% HST and sales outside the five provinces are subject to 5% GST, regardless (in most cases) of the seller's location in Canada. This leads to four possible tax situations:
1) Sales from a non-PP (like Alberta) to a customer that is also in a non-PP (like Manitoba) are subject to 5% GST.
2) Sales from a PP (like Nova Scotia) to a customer that is in a PP (like Labrador) are subject to 13% HST.
3) Sales from a PP (like Nova Scotia) to a customer that is not in a PP (like Alberta) are subject to 5% GST.
4) Sales from a non-PP province (like Manitoba) to a customer that is in a PP (like New Brunswick) are subject to 13% HST.
This boils down to the rule that sales INTO a PP are subject to 13% HST (12% into B.C.), and sales OUT of the PP are subject to 5% GST. Therefore, any business engaged in out-of-province sales must charge the appropriate tax rate depending on the provinces involved.
NewViews Accounting Software - NV2 for Windows
What Do NewViews Users Have to Do to their NV2 Books?
What NewViews users need to do depends on where they and their customers are located. If you, and all of your customers and suppliers, are in a participating province:
- Edit both the Purchase & Sales Journal's Default Tax Info tables. Set the TAX1 rate to T13. Remove any settings for TAX2 and, if necessary, change the TAX1 description to HST instead of GST.
- Examine both the Expense & Sales Account's Default Trade/Tax Info tables. Edit as necessary, any tax rate settings you may have placed in expense, and sales accounts that may be incorrect under the new tax system.
If you, and all of your customers and suppliers are NOT in a participating province:
- No changes are required to your procedures since you will continue to charge (and be charged) 5% GST on all purchases and sales.
If some of your customers and/or suppliers are in a participating province, and the others are not:
-
Edit both the Accounts Payable's & Accounts Receivable's Default Trade/Tax Info tables.
Edit as necessary, any "Tax1, Is Charged" & "Tax2, Is Charged" settings you may have used.
See the Transition from GST to HST for more information.
See the Changing the GST/HST Rate for more information.
NewViews Accounting Software - NV1 for DOS
What Do NewViews Users Have to Do to their DOS Books?
What NewViews users need to do depends on where they and their customers are located. If you, and all of your customers and suppliers, are in a participating province:
-
Run both the SETUPP and SETUPS procedures and set the TAX1 rate to T13.
Remove any settings for TAX2 and, if necessary, change the TAX1 description to HST instead of GST. - Using the NOTES procedure, you should examine, and edit as necessary, any tax rate settings you may have placed in asset, expense, and sales accounts that may be incorrect under the new tax system.
If you, and all of your customers and suppliers are NOT in a participating province:
- No changes are required to your procedures since you will continue to charge (and be charged) 5% GST on all purchases and sales.
If some of your customers and/or suppliers are in a participating province, and the others are not:
- You have a problem, since the current NewViews tax procedures do not have the ability to use differing tax rates based upon the supplier or customer involved. You will need the HST Update to manage the tax properly.
What is the NewViews HST Update?
The HST Update is a procedure library containing new versions of all procedures involved in tax calculations (SETUPP, SETUPS, NOTES, TAXP, TAXS and PRTINVS.) Also included are new versions of the PRTPAY, PRTSTMTS and INTEREST procedures. Since these procedures read settings from the SETUPP and SETUPS procedures, changes were required to work with the updated versions. The SETUPP and SETUPS procedures have a new field in which the harmonized tax rate is entered, and the tax status of suppliers and customers can now be set to exempt, taxable under GST, or taxable under HST. Similar changes were made to supplier and customer account notes screens for exceptions to the settings in the SETUP procedures. The NOTES screens for asset/expense and sales accounts have a new field for the HST rate applicable to that account (in addition to the existing GST rate field). As was the case with the GST rate field, the HST rate field will normally not be required unless varying rates of HST are introduced in the future. However, if in the past you have used the GST rate field to program special rates of GST to handle unusual circumstances, then the HST rate field should be set in a similar manner. TAXP, TAXS, and PRTINVS have been updated to calculate either GST or HST, depending on the tax status of the supplier or customer.
IMPORTANT!
This information on the HST is provided for information purposes only. Although Q.W.Page has attempted to provide
accurate and up-to-date information, we are not engaged in the business of rendering accounting or other professional
services. Accordingly, you should not rely solely on information provided by us. It is your responsibility to keep
abreast of, and comply with, changes in tax laws and procedures that affect you. For more information on the HST,
contact the Canadian Revenue Agency office nearest you.
See the Changing the GST/HST Rate for more information.