This article prepared by Ryan®, one of Canada's leading commodity tax consulting firms first appeared in Quebec Tax Reporter No. 738 dated December 2010.

"What's New in Provincial Commodity Taxes" is a feature exclusive to CCH Canadian Limited's provincial tax reporting services. Prepared by Ryan, one of Canada's leading commodity tax consulting firms, this feature provides readers with insights into government policies, bulletins, and related documents that are included in your CCH provincial tax service. In your electronic service, click on the link to the document referenced to view it directly, and rely on CCH and Ryan® to keep you up-to-date with expert commentary on breaking developments in Canadian commodity taxes.

Ontario

Guide 80, "Ontario First Nations Point-of-Sale Exemptions"

The province has issued Guide 80 to provide further details on the Ontario First Nations point-of-sale exemption. Effective September 1, 2010, status Indians, Indian bands, and councils of an Indian band may purchase qualifying goods or services off-reserve exempt of the eight per cent provincial component of the HST. The guide clarifies who is eligible and which goods and services qualify for this point-of-sale relief. 

First Nations persons eligible for the point-of-sale exemption include:

  • status Indians who are residents of Ontario;
  • status Indians who are residents of Canada and residents of the Akwesasne reserve; and 
  • Ontario Indian bands or councils of Indian bands of First Nations reserves (including the Akwesasne reserve).

Goods and services that previously qualified for exemption from retail sales tax when purchased by a status Indian (prior to July 1, 2010) will generally be eligible for point-of-sale relief from the provincial component of the HST. This includes: 

  • tangible personal property; 
  • warranty or maintenance agreements for eligible tangible personal property;
  • services to install, assemble, dismantle, adjust, repair, or maintain eligible tangible personal property; and
  • telecommunications services.  

The guide also provides several examples of goods and services which are not eligible for the point-of-sale relief. 

While Ontario continues to apply retail sales tax to certain insurance premiums for risks situated in Ontario,  insurance contracts entered into by qualifying status Indians, Indian bands, or band councils in respect of real property located on an Indian reserve will continue to be exempt from retail sales tax.

Purchases made via the Internet, or through another distribution channel where the presentation of a Certificate of Indian Status card is not possible, will not be eligible for the point-of-sale relief. However, a status Indian in this situation may apply to the Ontario Ministry of Revenue for a refund of the provincial component of the HST.

Status Indians, Indian bands, and councils of an Indian band may also apply for a refund of the provincial component of the HST where the tax has been paid in error or where goods have been imported into Ontario from outside of Canada or from another participating province, subject to certain conditions.  

British Columbia

Tax Bulletins on Designated Property

British Columbia has released a new tax bulletin, CTR 002, "Purchases of Designated Property by a New Corporation", in order to explain how vehicles, boats, and aircraft purchased by a new corporation may be exempt from the tax on designated property. Effective July 1, 2010, certain vehicles, boats, and aircraft purchased through a private sale for use in British Columbia are subject to a 12 per cent tax on designated property. When a new corporation purchases such designated property, it may be eligible for an exemption, subject to the following conditions:

  • the designated property is purchased on or before the day the new corporation begins to carry on business; 
  • the new corporation is registered for HST at the time the designated property is purchased;
  • the designated property is used in the new corporation's commercial activities; and
  • the seller paid or was exempt from the tax on designated property, HST, or social service tax.

Certain other conditions must also be satisfied, depending on whether or not the seller of the designated property wholly owns and controls the new corporation.

Note that the previously released bulletin CTR 001, "Tax on Designated Property (Vehicles, Boats and Aircraft)", has also been revised to provide further clarification on the various exemptions available for designated property, including the exemption for new corporations described above. 

Tax Bulletin on Sales to Government Entities

The province has issued a new bulletin, CTB 002, "Sales to Federal, Provincial, Municipal and Indian Band Government Bodies", in an effort to clarify how provincial sales taxes apply to sales made to federal and provincial government bodies, as well as how the HST applies to purchases by the Government of British Columbia. In general, federal, provincial, and municipal governments are all required to pay B.C.'s motor fuel tax, carbon tax, tobacco tax, the tax on designated property, and any municipal or regional district tax on purchases in British Columbia, unless a particular supply is specifically exempted under the legislation.

Notice to Social Service Tax Vendors

Notice 2010-012, "Notice to Social Service Tax Vendors", has been issued by the province to explain to vendors when they may recover social service tax remitted to the Ministry of Finance, but later returned to a customer. For social service tax purposes, vendors are generally not permitted to make an internal adjustment on a supplemental tax return to recover tax returned to customers for returned goods, cancelled services, or price adjustments. In these circumstances, vendors are required to return social service tax on credits issued to customers on or after July 1, 2010, but before January 1, 2011 (November 1, 2010 for returned goods). However, in order to recover the returned tax, vendors must apply to the Ministry using form FIN 408, "Application for Refund (Vendors, Operators, and Lessors)". Refund applications must be received before March 1, 2011 (January 1, 2011, for returned goods).

Quebec

Guide IN-308-V, "Filing an Objection"

Revenue Quebec has released this new guide to inform taxpayers about the province's commitments regarding the Notice of Objection process, and the quality of service that can be expected. For instance, the guide indicates that an objection to a Notice of Assessment should be processed within six months of receipt. The guide also reminds persons filing an objection that any submissions should include a statement of the facts and reasons justifying their position, along with documentation to support the claim. In addition, the guide notes that Revenue Quebec (Direction des oppositions) is authorized to grant reasonable extensions, depending on the circumstances, and that any request for an extension should be made as soon as possible.

Manitoba

Information Bulletin TAMTA 002, "Bulk Sales-Buying and Selling Business Assets"

Manitoba has created this bulletin to explain both the seller's and buyer's requirements when business assets are sold in a bulk sale. A bulk sale is defined as the sale of business assets (including a barter or exchange) in connection with the seller ceasing to carry on business in Manitoba.

In a bulk sale, the seller is required to obtain a Bulk Sales Clearance Certificate, issued under section 45 of The Tax Administration and Miscellaneous Taxes Act ("TAMTA"), which indicates that the Taxation Division has no security interest in the business assets being sold at the date of the sale. The buyer of bulk assets, in most cases, will be required to pay retail sales tax on their purchase of any taxable assets by completing a Casual Purchaser's Return and submitting it, along with any retail sales tax due, to the Taxation Division.

Saskatchewan

Information Bulletins Updated for Warranty Contracts

Saskatchewan has updated several bulletins to clarify how its provincial sales tax ("PST") applies to manufacturer's extended warranty contracts and equipment warranty insurance contracts. Generally, optional manufacturer's extended warranty contracts, including any deductible charges related to such contracts, for new or used equipment, farm machinery, and motor or recreational vehicles are subject to PST. Any charges to transfer an existing contract to another owner are also subject to PST. 

Equipment warranty insurance contracts differ from manufacturer's extended warranties, as the insurance contracts are underwritten by an insurance company and a dealer selling such contracts must be licensed with the Insurance Council of Saskatchewan. Dealers selling equipment warranty insurance contracts for new or used equipment, farm machinery, and motor or recreational vehicles should not collect PST on the sale of these contracts, since the tax will be paid when the customer or insurance provider is invoiced for the repair.