Masthead Special Reports
The HST in Ontario and British Columbia: What it means for magazines

By David Perri

The implementation of the harmonized sales tax (HST) in Ontario and British Columbia on July 1 means businesses across Canada will have to adjust to the new sales tax environment. The following FAQs answer important questions about what Ontario and B.C.’s move to the HST means for magazine publishers.

What is the HST?
The HST will replace the government sales tax (GST) and provincial sales tax (PST) in both Ontario and British Columbia on July 1, 2010. Previously, the two taxes were administered separately by the federal and provincial governments. After July 1, the taxes will be blended and the Canada Revenue Agency will administer the HST for both provinces, along with Nova Scotia, New Brunswick and Newfoundland and Labrador, which have already implemented the combined tax. Québec also has a blended sales tax, but it is administered by Revenu Québec.

Are there any differences between the Ontario and B.C. HST?

Ontario’s HST will be 13 percent, while B.C.’s will be 12 percent. The difference comes from the variation in PST rates between the provinces, which is eight percent in Ontario and seven percent in B.C. Specific exemptions vary between the provinces and are listed further below.
Why did Ontario and B.C. introduce the HST?
The federal and provincial governments say the HST will help businesses by lowering taxes on inputs. A TD Economics report on the HST’s impact estimates it will reduce the cost of doing business by $6.9 billion annually in both provinces. The report says these savings will be passed onto consumers, which could lead to a 0.8 to 0.9 percent decrease on before-tax prices of goods and services.

Despite the tax savings for businesses, both provincial governments maintain the HST will be revenue neutral on their balance sheets. The tax burden “will shift from businesses to consumers,” the report says, who will be taxed an estimated average of 1.5 percent more on consumption in both provinces.

The move is also expected to cut down on administrative costs for businesses and government by streamlining tax rules, filing and collection practices. A number of provincial employees who administer the PST will be transferred to Canada Revenue Agency, while redundancies will be eliminated. The federal government will also give Ontario and B.C. $4.3 billion and $1.6 billion, respectively, to aid their transition to the HST.

How will the HST affect magazines’ newsstand prices in Ontario and B.C.?

In Ontario there will be no price change for single-copy magazine sales, which are already taxed by both the GST and PST. However, magazines on B.C. newsstands have a PST exemption, but will be hit with the full HST after July 1, adding seven percent to their price for consumers.

How will the HST affect magazine subscription prices in Ontario and B.C.?

Magazine subscriptions are currently exempt from PST in both provinces. However, starting July 1 the HST will be applied to subscriptions, raising their cost by eight percent in Ontario and seven percent in B.C.   

If I sign up a subscriber before July 1, 2010, do I have to charge the HST?

It depends. If payment for a subscription of any length is made before July 1, the HST does not apply. Subscriptions will be taxed based on the rules in place at the time they are paid for, so payment must be received before July 1 to avoid paying the HST, this is important to consider for Ontario and B.C. publishers running “beat the HST” promotions.

A pre-HST “bill me” order that is paid after July 1 is HST taxable. Also, payments received after July 1 from monthly payment plan subscribers will be charged the HST.

I’m an Ontario or B.C.-based publisher selling subscriptions across Canada. Do I have to charge the HST to subscribers in other provinces?
It depends. You charge subscribers sales tax based on the local tax regime where the magazine is delivered. There are different rates for customers in HST and non-HST provinces, regardless of where the publisher is located.

If your magazine is shipped to a HST province, you must charge the customer their local combined rate. For example, if a B.C. publisher sends an issue to a subscriber in New Brunswick, the customer will be charged New Brunswick’s 13 percent HST.

In a split-tax province GST is always charged on subscriptions but PST may or may not apply based on the subscriber’s local tax regime. For instance, if an Ontario publisher ships a magazine to a subscriber in Prince Edward Island, the customer is only charged five percent GST, because magazine subscriptions are PST exempt in that province.

I am a PST-exempt publisher for many of my business costs, do I now have to pay the HST?
Yes. The HST applies just like the GST. But you can claim input tax credits for the HST paid on business expenses including printing, postage, etc. So in the end the HST costs on business expenses are offset by the input tax credits you claim.

Will my suppliers start charging HST on their invoices? What if I’m based in Ontario or B.C. but my supplier is based outside the province?
Yes. HST will start appearing on payables for Ontario and B.C. publishers, even if your supplier is out of province. HST is applied based on the local rate where the supply is delivered. For instance if a B.C. publisher purchases supplies from Ontario, Saskatchewan and Manitoba, all such supplies are deemed to be made in B.C., and subject to the province’s 12 percent HST. But you can claim the tax costs on input tax credits.

I am a publisher located in more than one province. If I purchase inputs in provinces with varying tax regimes, do I have to calculate input tax credits separately?

Yes. The input tax credits you can claim are based on the tax paid, so you will have to keep track of the tax you pay on inputs in different provinces separately. For instance a publisher with offices in Ontario and B.C. will pay 13 percent HST on supplies in Ontario and 12 percent in B.C. Publishers that operate in B.C. or Ontario alone don’t need to worry about this, as inputs supplied from any province are taxed based on where they are delivered (your location).

Do I have to register separately for the HST?
No. If you are registered for the GST, you are automatically registered for the HST.

How often do I have to submit HST collected and input tax credit reports to the government?
Businesses in Ontario and B.C. will be required to report their HST according to their current GST filing frequency.

I’m an Ontario or B.C. publisher, do I have to add HST to my advertising invoices?
It depends. New rules for services (such as advertising) are also coming into force on July 1. Under the new rules the tax you charge a Canadian advertiser depends on where they are located and their local tax regime. For example, if an advertiser from B.C. buys a one-page ad in a Manitoba-based magazine, the client will be billed B.C.’s 12 percent HST. Any increased costs to advertisers can be claimed on input tax credits. Advertisers from outside Canada are not subject to the HST.

Is anything exempt from the HST in the two provinces?
Yes. Exemptions for the provincial component of the HST (eight per cent in Ontario and seven percent in B.C.) are listed below for each province. The five percent GST portion of the HST still applies to these products.

Ontario exemptions:
•    Newspapers
•    Books
•    Prepared food and beverages under $4.00
•    Child products including car seats, diapers, clothes and footwear
•    Feminine hygiene products

B.C. exemptions:
•    Gasoline, ethanol, diesel, and biodiesel fuel for motor vehicles, locomotive fuel for trains, marine diesel fuel for boats and aviation and jet fuel for aircraft
•    Residential energy
•    Books
•    Child products including car seats, diapers, clothes and footwear
•    Feminine hygiene products

Are any other provinces planning to introduce the HST?
The federal government is lobbying the remaining split-tax provinces (Prince Edward Island, Manitoba and Saskatchewan) to adopt the HST, but they have not been receptive at this point and nothing has been officially announced. Alberta does not have PST.

Are sales tax rates changing in any other provinces?
On July 1, 2010 the provincial portion of Nova Scotia’s HST will increase from eight to 10 percent, bumping its HST up to 15 percent. Other provinces have not announced any plans to change their tax rates at this time.

Where can I get more information?
Canada Revenue Agency
General Information for GST/HST Registrants
Ontario Ministry of Revenue
B.C. Ministry of Finance
TD Economics special report

Thanks to these readers for their input:
Brad Drysdale, manager, commodity tax,
Rogers Communications Inc.
Farnaz Riahi, VP of accounting, Canada Wide Media
Ron Stanley, controller, North Island Graphics Media
Scott Wheatley, director of circulation, Canada Wide Media
Peter Wilmshurst, publisher, Allergic Living magazine

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Wow, Torstar really seems to be on a mission to bankrupt one magazine after another....