Not yet too late for Ontario, BC SMBs to become HST compliant

Despite a long government campaign to get taxpayers onboard with the HST which came into effect this July 1^st, a majority of small businesses in Ontario and British Columbia are opposed to and unprepared for the new tax regime.

More that 54 per cent of respondents in Ontario and 47 per cent in B.C. won’t be ready to comply with the changes, according to recent survey by poll body Angus Reid Public Opinion for Intuit Canada, a tax software developer.

No less than 35 per cent of respondents in both provinces also admitted they don’t understand the need for the new measures.

Angus Reid found that 76 per cent of small businesses in B.C. and 79 per cent in Ontario are against the HST implementation.

For more on the survey, view this article on ITBusiness.ca

On July 1, the goods and services tax (GST) and the provincial sales tax (PST) were  merged into the HST in Ontario and BC. In B.C., the rate is 12 per cent. Of that, seven per cent is allocated to the provincial government, while five per cent goes the federal government. For Ontario, the overall rate is 13 per cent; eight per cent provincial; and five per cent federal.

It’s not yet too late for businesses in Ontario and BC to get their operations in line with the new tax scheme.

Despite much opposition to the HST, businesses do stand to benefit from the new regulation. The key is to start the consult your accountant or tax expert and begin the transition.

Here are some sites that can help out:

http://www.rev.gov.on.ca/en/taxchange/

http://www.taxtips.ca/gst/onhst.htm

http://www.ingdirect.ca/hst101/

http://www.cfib-fcei.ca/cfib-documents/DIN0739.pdf

Here are some ways SMBs can realize savings on the HST through the following:

Input tax credit – The ITC reimburses businesses for purchases that were previously PST-exempt but now covered by the HST. Businesses still have to pay the PST portion but they can get reimbursed for 100 per cent of that expense through the ITC.

HST transition credit – A credit of $300 to $1,000 is available for businesses as compensation to offset expenses incurred to accommodate the transition.

Defer purchases – Consider deferring purchases that are subject to non-recoverable Ontario Retail Services Tax (ORST) or B.C. PST until after June 30, 2010, according to ING Direct Canada. The HST you pay on those purchases after June 30 is recoverable and could save you eight per cent.

Lease ORST or BC PST purchases – If your business can’t defer certain purchases that are subject to ORST or BC PST, consider leasing for a few months to minimize the mount of provincial sales tax you will pay.

Accelerate purchases if you can’t recover HST in full – Business that will not be able to recover the HST in full, should consider accelerating purchases that will be subjected to the additional eight per cent in Ontario and seven per cent in B.C.

HST point-of-sale rebates – ING said there will be HST point-of-sale rebates on gasoline and diesel fuel (B.C. only), books, children’s clothing, footwear, car seats, booster seats, diapers, feminine hygiene products, print newspapers (Ont. only) and qualifying prepared foods and beverages that cost less than $4 (Ont. only). These items will be taxed at five per cent GST only.

Here are some items you need to take care to get your businesses HST compliant.

1)     Consult with a tax professional to determine how the HST will affect your businesses. Make plans to change you systems and procedures.

2)     Make sure you collect the right amount of tax on goods and services you sell. Update sales equipment. Ensure that the rate in the billing or point-of-sale system you use reflects the accurate amount.

3)     Ensure that marketing collaterals such as ads, signs, coupons, catalogues, newsletters, brochures, etc. reflect the appropriate HST changes.

4)     Prepare your financial plans, budgets and forecasts to factor in the HST. For example, you are entitled to the ITC but you need to pay the PST portion upfront and wait for the reimbursement later. This means money out your reach until the reimbursement comes in.

5)     Consider including tax clauses on contracts and agreements to make sure clients are aware of the HST and the removal of the ORST and the BC PST.

Nestor Arellano is a senior writer for ITBusiness.ca.  Follow Nestor on Twitter,  read his blogs on ITBusiness.caBlogs or find him at ITBusiness.ca’s Facebook page