Some of the most common questions we get from our clients are about navigating through the complicated world of HST. In the first blog of our HST series, we will be discussing Place of Supply Rules. Place of Supply Rules affects every organization that does business in more than one province or who has customers coming from other provinces.
Place of Supply Rules determines what rate of tax to apply to a sale. It sounds straightforward but it can be quite complicated. The rules vary based on the following nature of supply:
Goods by way of sale: The amount of tax applied is based on where the goods are being delivered. For example, if they are delivered in Ontario, they would be charged 13% HST but if they are delivered in Alberta, they would only be charged 5% GST as Alberta has no provincial sales tax. This would be the case even if the customer being invoiced is located in, say, Nova Scotia, where the rate of HST is 15%.
Goods by way of lease: The place of supply rules for leases depend upon whether the lease is for more than three months or for three months or less. The place of supply can change over the course of a longer term lease, but is fixed at the location where the property is made available to the customer for a short term lease – even if the property is moved to another province before the lease is up.
Real Property: It makes sense that the rate of tax to apply to a sale or lease of real property is based on where the property is located.
Intangible Personal Property: Software rights and trademarks and patents etc. have a very complex set of rules to determine what tax rate applies. This is too complicated to summarize in a blog but we would be happy to help you through this issue.
Services: This amount of tax applied to a service provided is usually based on the address of the person who is receiving the service – unless one of the various overriding rules applies. One of the more common overriding rules is for personal services performed in the presence of the customer. These services will be taxed at the rate for the province where the service is performed. For example, if I live in Quebec, but get my hair cut in Ontario, I will pay 13% Ontario HST.
There are many challenges to Place of Supply rules because they are not as black and white as they seem. Often businesses such as car dealerships selling to owners from various provinces can run into complications. Additionally, businesses who provide services to someone with centralized billing in a different province as well as associations who have members in different provinces or host a conference in a different province each year face their own set of challenges. Navigating these rules is tricky and the help of a trusted advisor is your best course of action to make sure that you are in compliance.
If you are interested in more information, check out our webinar “Top 3 HST Issues that Organizations Face”.
Feel free to contact Garth Steele, CPA, CA , Indirect Tax Partner at [email protected] or Dineen Beath, Lawyer – Taxation, Tax Planning and Tax Litigation at [email protected] if you have any questions!
Garth Steele, CPA, CA
Indirect Tax Partner