Sales Taxes for Video Producers

Agenda– Introduction & disclaimer– Two sales taxes that you must understand– Why should you care?– GST / HST– PST– Q&A

Sales Taxes for Video Producers

Jim Westwell, CGA - experienced in the film & television industry

I am NOT a tax practitioner – I will share my experiences and past practices to help put

things in context This session is for general information and discussion

– You should seek professional advice or do your own research for specific issues

– Ask for a guidance from tax help lines – Request a written ruling for specific questions

Two sales taxes that you must understand: GST - Goods & Services Tax - Federal PST - Provincial Sales Tax - Province of

BC Why should you care?

– Failure to comply can cost you BIG BUCKS Imputed - All taxable sale will be assessed as if you

charged on a tax included basis Heavy penalties and interest for 3 years retroactive

GST - Goods and Services Tax

A “value added tax” - Hits the supply chain Federal jurisdiction - Canadian territory Applies to most good &/or services

– Exceptions: Payroll Basic Groceries Medical & Dental Services Financial Services & Interest Insurance & residential rents

GST -Goods and Services Tax

Almost everyone pays the GST - No Exemptions– Except for “0 Rated” sales such as exports (and

above exceptions) If you ship a finished DVD to a customer outside of

Canada - No GST If you only supply services to a foreign client in

Canada - Charge GST– Place of service rules

GST -Goods and Services Tax

Final GST liability is with the final consumer of the product or service

All others who pay GST along the supply chain can claim GST paid or incurred as an Input Tax Credit (ITC)– Supply chain vendors MUST be registered for

GST to claim Input Tax Credits

GST -Goods and Services Tax

Registration requirements:– If you charge GST– If you have revenues of $30,000 per year

If registered you must charge and remit GST on all sales

You can opt to file tax returns– Monthly– Quarterly– Annually

GST -Goods and Services Tax

Accounting records must be kept– Record all sales and taxes charged thereon– Record all expenses and GST paid thereon– Record all Capital (Equipment & Software)

purchases and GST paid thereon Your records can be your best friend or worst

enemy– Do them right and DO NOT cut corners– You will eventually be audited so be ready

GST -Goods and Services Tax

Receipt requirements– $30.00 (including all taxes) or over:

Amount of GST or statement that GST is included and identification of items taxed

Supplier’s GST registration number

– $150 or over: Above requirements Purchaser’s name Terms of payment Description to identify each item

GST -Goods and Services Tax

Tax returns – File on time and stay off their radar– Report all sales for the period even if you have

not collected the receivable– Calculate the total GST charged for the period

(collected or not)– Calculate total GST incurred (Input tax Credit)

for the period (paid or not)– Pay or claim a refund on the difference

GST -Goods and Services Tax

“Quick Method” – Annual sales (including tax) under $200,000– No need to account for GST Input Tax Credits– Remit a flat percent of sales plus tax:

4% of first $30,000 of sales including GST tax 5% on remaining sales and GST billed You keep the difference

– Can still claim Input Tax Credits on capital items - such as cameras, software & computers

GST -Goods and Services Tax

Example of “Quick Method” Annual sales & tax -50,000+3,500=$53,500 Remit:

– 4% on first $30,000 = $1,200– 5% on remaining 23,500 = 1,175– Total tax paid $2,375– Total tax collected 3,500– Net Input Tax Credit $1,125

GST -Goods and Services Tax

Harmonized Sales Tax - HST– All GST registrants must collect and remit 15%

of “taxable supply” in: Nova Scotia New Brunswick Newfoundland & Labrador

– Same rules as GST– Make payment s to CRA

GST -Goods and Services Tax

Self-assessment– Any goods that you have taken from the

business on which as an ITC has been claimed– Any goods and services that you import into

Canada that were not taxed at the border Space on the tax form to report & offset against

other tax issues

– Beware: This is a standard target of opportunity for GST auditors

PST - BC Provincial Sales Tax

Retail Sales Tax Applies to sale or lease of “Tangible

Personal Property “(TPP) All “Vendors” of “TPP “ must register &

collect PST on sales of their product Also applies to some “Taxable Services”

PST - BC Provincial Sales Tax

Exemptions apply to materials that become a component part of the finished product– DV tapes (assuming that the client gets them)– DVD blanks & cases– Ribbons & labels– DVD case cover paper and toner or ink

Other exemptions include groceries, books, bicycles, and services

PST - BC Provincial Sales Tax

Bulletin SST 053 specifies “Videotaped Events”

Requires tax on ALL “charges that the customer must pay to acquire the video tape”– Travelling expenses– Labour– Other amounts

PST - BC Provincial Sales Tax

Video producer must pay PST on his/her “purchases for business use”– Cameras, lighting, microphone & tripods– Computers, software and printers– Office furnishings, supplies and overhead– Camera repairs (“taxable services”)

PST - BC Provincial Sales Tax

Bulletin SST 076 may apply if videographer services a “Motion Picture”– May be exempt from charging PST for services

if he supplies “Owner Operated Equipment”– Contract must specify responsibility for

operating the equipment

PST - BC Provincial Sales Tax

Self-assessment required:– On all purchases outside of BC (if not taxed or

exempted)– All purchases in BC that were not otherwise taxed

or exempt– Exempt goods for resale that are later used for

personal or business use This is a favourite area for auditors so play it

straight

PST - BC Provincial Sales Tax

Accounting records and tax returns– Same basic rules as for GST

Summary

Sales taxes are a serious matter Ignorance of the requirements is NOT a

defense If you are in business,

– Know what is required to comply with sales tax laws and regulations

– Run your business accordingly

Final Words of Advice

Retroactive taxes, penalties and interest can KILL your business and put you into personal bankruptcy so don’t fool around.

Be honest and the auditors will lose interest in you

Thanks for your attention.

Questions and Comments