How HST Will Affect Your Business

July 1st is coming up fast, and with it comes big changes. Most British Columbians are aware that the Harmonized Sales Tax, better known as HST, will come into effect at the turn of the month. This article is designed to help business owners and consumers alike with the transition into this new tax.

Although we have all heard of HST, some of us may not know exactly how it works. HST is imposed under the Excise Tax Act (ETA), a federal legislation, and is administered through the Canada Revenue Agency (CRA). The Harmonized Sales Tax is a combined 12 percent; 7 percent replaces our current Provincial Sales Tax (PST) while the other 5 percent federal, replacing the current Goods and Services Tax (GST). The Hotel Room Tax, HRT, will also be abolished, as HST will apply to short term accommodation. However, the additional 2 percent (DMO) HRT applied to specific communities, including Golden, will remain.

Most service based businesses that are not required to charge PST will be required to charge the full 12 percent of HST. However, there are some items which are exempt from the 7 percent provincial part of the HST, meaning the tax would drop to 5 percent. Merchants of exempt items provide Point of Sale rebates. The items included in this rebate are: books, children's clothing and footwear, children's car seats or booster seats, children's diapers, feminine hygiene products and motor fuels such as gas and diesel. It is important to note that these Point of Sale rebates will not affect your eligibility to claim Input Tax Credits on your business inputs.

It is important for business owners to know the advantages HST provides. Although there will be a few inconvenieces, such as upgrading and changing your systems, most will remain the same. For example, if your business is already registered for GST, you will not have to apply for a new number. Your HST number will be the same as your GST number and you will file on the same days as your GST was filed. Like GST, HST is a Value Added Tax, meaning business owners can claim the full 12 percent of taxes paid when purchasing items for the business. However, this only applies to purchases made in BC. Items purchased in Alberta only have 5 percent tax on them, meaning only that 5 percent can be claimed.

There are a couple steps that business owners should follow to prepare of the implementation of HST:

1. Upgrade your point of sales machine, costs and accounting systems.
2. Be informed about the taxes your specific business needs to charge. As mentioned before, some businesses that do not charge PST will be required to charge HST.
3. Call Numbers & Letters Business solutions Ltd. at (250) 344 - 4742 to book an appointment for upgrading your knowledge and programs, such as Quickbooks and Simply Accounting, today!

Further information on HST can be found at:

• http://hst.blog.gov.bc.ca/
• http://hst.blog.gov.bc.ca/faqs/hst-basics/
• http://sbinfocanada.about.com/od/gsthst/a/bchst.htm