In an effort to achieve greater efficiencies, the provincial governments of Ontario and British Columbia are harmonizing theirrespective sales tax with the federal Goods and Services Tax (GST). While the provinces tout the benefits of combining the taxes, suchas reducing compliance costs and attracting new investment and jobs, there are specific issues that will impact you. If you workwithin a Municipality, University, School or Hospital (MUSH sector), here’s what you need to know.

THE FACTSIf you are registered for GST, you are automatically registered for the Harmonized Sales Tax (HST). This combined tax iscomparable to the HST that exists in the Maritime provinces that harmonized their sales taxes with the GST more than a decadeago. Effective July 1, 2010, B.C. and Ontario’s provincial sales tax (PST) will be eliminated and replaced by the HST. From this dateforward, all sales of goods, services, certain real property and intangibles “supplied” in B.C. will be taxed at 12% HST; whileOntario will be taxed 13% HST.

HOW WILL HST IMPACT THE MUSH SECTOR?The mandate of HST is to generate long-term economic growth that will generate more revenue to sustain and improve crucialpublic services. To ensure the MUSH sector will not pay anymore provincial HST after harmonization than they currently pay in PST,the provinces have proposed new provincial rebates:

Proposed Rebates for the MUSH Sector

GST B.C. HST ONT. HSTMunicipality 100% 75% 78%Universities 67% 75% 67%School Authority 68% 87% 93%Hospital Authority 83% 58% 87%Charity 50% 57% 82%Qualifying NPO 50% 57% 82%

FREQUENTLY ASKED QUESTIONSQ: How will the HST impact our budgets? Will we be paying HST on the same expenses we currently pay GST on?A: The HST will be applicable to everything that GST is applicable on and will impact cash flow.

Chartered Accountants & Business Advisors

Managing the Harmonized Sales TaxWhat You Need to Know

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Q: Will our expenses be reduced because we will receive a rebate for the PST portion of HST?A: We do not expect expenses will be reduced. The goods that an entity would have paid PST on will now be subject to HST, and partof that will be recoverable through the rebates illustrated above.

Q: Will our costs increase because we will pay 8% extra on expenses that are currently only subject to 5% GST?A: Cash flow will be impacted. However, if the rebates are used correctly and in a timely manner, your organization should be in thesame position.

Q: What if we are not currently registered for GST/PST?A: It is important to review whether your entity is required to be registered for GST/HST. If your entity is carrying on taxable activitiesit may be beneficial to consider voluntarily registering for GST/HST in order to claim back additional tax as input tax credits.

HOW MNP CAN HELPThe rules surrounding the HST transition are complex. That’s why it’s important to work with a professional who can help youunderstand the rules, set up the proper systems, and take advantage of the tax savings. Working closely with you, MNP can perform adiagnostic analysis, establish priorities for necessary systems and process changes, and help you minimize cost and cash-flow impacts.

ABOUT MNP MNP is one of the largest chartered accountancy and business advisory firms in Canada. For more than 60 years, we have proudlyserved our clients in the public and private sectors. Through partner-led engagements, we provide a cost-effective approach to doingbusiness and customized strategies to help you achieve your goals.

To find out what MNP can do for you, contact your local MNP Advisor or call Kal Ruprai, CMA, Indirect Tax Specialist

at 416.515.3811 or e-mail kal.ruprai@mnp.ca.

Visit us today at mnp.ca

Finding the right answer starts here.

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