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Tips for avoiding the harmonized sales taxman

With everyone being so serious about HST it was only fitting I came across this article shown below in “The Globe and Mail” newspaper by Dianne Nice. This bold look into ducking the harmonized sales taxman was an interesting read and some what controversial. Therefore I decided to make my own observation on Dianne’s tips.

1. Buy Now, Use Later

Even if you prepay, you still pay HST on services used after July 1. But products aren’t subject to that rule. So if you know the purchase of some durable product (e.g. washing machine, fall wardrobe, camping gear) is in your near future, buy it before July 1, even if it sits unused. In fact, since HST adds 8 per cent and you can borrow money at a much lower rate, do this even if you have to take a short-term loan to do so.

My opinion: The problem with this advice for small businesses is that you will likely pay PST on goods up to June 30th but PST is not refundable and HST is. Net result is that you are out of pocket 7% of the purchase price unless you have a PST number.

2. Get to know the Internet

Look for retailers in Alberta and other “tax havens.” They won’t charge you HST or even PST if you have an out-of-their-province shipping address. Even after paying shipping and handling, you’ll save money.

My opinion: The problem with this suggestion is that in BC PST is a point of use tax. So if you buy in Alberta and use the goods in your business in BC you are supposed to self assess and send in the PST on the goods until June 30th or the HST after July 1.

3. Don’t make coffee runs. Seriously.

Since the first $4 of a coffee purchase is HST exempt, you can buy your own cup with no taxes. Offer to pick one up for your office mate and your tab rises over the magic $4 level and becomes taxable.

My opinion: Good idea.

4. Go south for services

If you buy products in the United States, you still pay HST upon returning to Canada unless you have a personal exemption due to an extended stay. But services are not so easily detected. Go to a spa in B.C. or Ontario and you pay HST. Have it done in the U.S. and there is none … and now you pay with parity dollars. Ditto for pet services and anything else where the service provider doesn’t have to visit your home or workplace.

My opinion: This works well as long as the cost of the trip to the US is less than 7% of the purchase price of the services you are ahead.

5. Switch to e-books

Even though you’ll still have to pay HST on e-books, you won’t pay as much as you would on the hardcover or paperback version because e-books are cheaper.

My opinion: Good idea. A green strategy as well.

6. Get on the Internet

The government has a rebate program and the exempted products and services are many and varied. You can’t adjust your spending until you know where the tax applies and doesn’t.

My opinion: Valid point.

 

 

7. Divide and conquer.

 

Since the first $400,000 of a house is HST exempt, you can buy two $399,999 properties and pay no HST or buy one $800,000 home and pay $32,000 in taxes. Can you arrange to be sold a house for $399,999 and the surrounding land for $399,999 to save $32,000? Or maybe buy two row houses and take out the dividing wall!

 

My opinion: Not sure this will work in BC with our higher housing costs. Maybe you can buy 3 or more old apartments and combine them?

 

Is your company fully prepared for HST ?, If not don’t panic we can help. Contact us now for advice from our highly qualified team of bookkeepers and accountants. Click here to get in touch.

 

Let us worry about your HST transition so you can carry on growing your business.

 

Source: The Globe and Mail

 

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Posted in Blogs, tax tips