Construction contractors not ready for harmonized sales tax

Posted by Rumin Mann
July 13th, 2010

Construction contractors in both B.C. and Ontario may not be ready for the Harmonized Sales Tax. This is the conclusion of an accounting consultant, who’s been holding seminars in Ontario and B.C. to prepare construction businesses for the Harmonized Sales Tax (HST).

A recently conducted opinion poll also backs up that claim.

“The HST will have such a large impact on contractors, but they are not aware of it,” said construction business and management consultant Ron Coleman.

“Generally, contractors are not ready. When I do seminars, people are quite surprised with some of the things I have told them.”

Both the Ontario and B.C. governments implemented their plans to harmonize the provincial sales tax (PST) with the federal Goods and Services Tax (GST) on July1.

The HST will create a single tax rate of 12 per cent in B.C. and 13 per cent in Ontario.

A recent Angus Reid Public Opinion survey of business owners in the two provinces, found that many weren’t prepared.

The survey found that 54 per cent and 47 per cent of the respondents in Ontario and B.C. respectively won’t be ready to comply with the changes.

A majority of respondents – 63 per cent in B.C. and 54 per cent in Ontario — feel the new tax will drive customers to make their purchases in provinces without an HST.

In the last few weeks before the HST went into effect, Ron Coleman has done eight seminars in Ontario and three in B.C. that deal specifically with the implications of the new tax on contractors.

For example, Coleman said that Canada Revenue Agency notice # 249 requires all contractors with annual sales of more than $1.5 million to file an electronic tax return.

“If you file a paper return, they will throw it out and keep the cheque,” he said.

“Nobody was aware of this and most contractors do more than $1 million in annual sales. They could be penalized for late filing, even though a return was submitted.”

Another change that will hit a lot of contractors is HST notice # 4 from the provincial government that deals with the requirement for the temporary recapture of input tax credits.

“The notice says if you earn $10 million or more, you can’t get back all your HST,” said Coleman.

“Contractors will lose the provincial portion of the tax on energy, telecommunications, meals and entertainment and certain vehicle costs. This is quite a significant portion of taxes over the next eight years.”

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