TAX NEWS - 2010

Canada HST: Last-minute scramble for HST

'People just haven't thought about it,' says Island tax specialist

Getting ready to handle the new HST seems to have taken many businesses by surprise.

"What I'm finding is that people just haven't thought about it," said Tara Benham, a Duncan-based tax specialist and partner with accounting firm Hayes, Stewart, Little & Co.

One client was still attempting to figure out the HST just a day before its introduction yesterday, said Benham, noting the businessman had not looked into the rules that apply to his situation.

Benham recommends going to a B.C. government website for details about the tax: http://hst.blog.gov.bc.ca.

The HST is a single tax, replacing the goods and services tax and provincial sales tax in B.C. and Ontario. In some cases, tax rates are rising for goods and services that were previously exempt from the provincial sales tax.

For example, in B.C. seven per cent in tax is being added to restaurant meals, bicycles, landscaping, repairs to ovens and admission to museums and art galleries. Combining the five per cent GST and seven per cent provincial sales tax puts the total HST at 12 per cent.

Benham's assessment squares with an Angus Reid survey in June that revealed 47 per cent of small business owners in B.C. would not be ready to comply with the HST on July 1. The same survey also showed 54 per cent of small business owners in Ontario would not be ready.

The survey, prepared for tax-management software maker Intuit Canada, showed 76 per cent of B.C. small business operators oppose the HST. The B.C. portion of the survey was done with 100 small business owners that have fewer than 100 employees. Results are considered accurate within 9.8 percentage points, 19 times out of 20.

Smaller companies have not been asking many questions, Benham said. "We've sent out letters and lists and everything that we could possibly think would be useful to our clients. Perhaps what we've been sending out is appropriate enough and they've done it and they are not asking any questions, or perhaps they've just been avoiding the whole issue."

Some large business clients with more complex needs have been seeking interpretations.

There is confusion surrounding what happens when businesses sell products outside the province, Benham said. If a product is being mailed to Ontario, for example, the 13 per cent HST rate in that province applies. "It's quite complex," she said. "You have to know what the HST rate is for each separate province that you're shipping to, and they're all different."

At Victoria's Owen Business Systems Ltd., calls have been pouring in on how to adjust point-of-sale devices and cash registers, said co-owner Dave Jaenen. On the day before the HST came into effect, 15 e-mail inquiries were arriving every three minutes.

To keep up with demand, customers were asked to

e-mail information about their systems to receive replies about how to make adjustments, Jaenen said. "It's brutal," he said.

Customers began seeking help a couple of months ago, but requests spiked in recent days.

Newer computerized point-of-sale devices are easy to adapt, Jaenen said. But it can be challenging to work with older electronic cash registers, often found in small businesses.

Jaenen expects that calls for help will continue for some time.