Tax Memo: Sales Tax Harmonization in British Columbia and Ontario – Manufacturing
After 18 years of maintaining a Provincial Sales Tax (PST) alongside the federal Goods and Services Tax (GST), Ontario and British Columbia harmonized their sales tax systems with the GST. Effective July 1, 2010, instead of a 5% federal GST and PST of 8% (Ontario) or 7% (British Columbia), a single Harmonized Sales Tax (HST) applies: 13% in Ontario and 12% in British Columbia. An HST has existed in Newfoundland and Labrador, Nova Scotia and New Brunswick since 1997.
Most economists applauded this decision as a step toward improving the productivity and competitiveness of the manufacturing sector in Ontario and British Columbia. Although manufacturers had been permitted to buy materials and production equipment exempt from PST, numerous purchases by manufacturers, from office equipment to delivery vehicles, were subject to PST—a significant cost.
Under the HST, manufacturers pay more tax overall on their purchases but, as with the GST, they are able to recover most of the HST paid on purchases by claiming input tax credits on their GST/HST returns. Therefore, removal of the non-recoverable PST will lower costs and improve the competitiveness of Ontario and British Columbia manufacturers
Download this Tax Memo to learn more.
