HST supply chain implications discussed

TORONTO — With start-date looming for both Ontario and British Columbia, and changes coming to Nova Scotia’s rate, a tax analyst predicts businesses in those provinces will benefit.

Danny Cisterna, a partner at Deloitte & Touche LLP in Toronto, told Canadian members of the International Warehouse and Logistics Association recently, how they can best integrate the HST into their processes.

"On those things that you’re now paying non-recoverable PST, you’ll be paying HST, and the 8 percent provincial component now gets recovered, so your costs go down," he said. "That’s a good thing."

He pointed out that separate federal and provincial sales tax forces businesses to pay tax against input costs and this makes them not only less efficient, but less competitive. "HST or value-added sales tax, which is what the GST is, makes you that much more competitive out there, for the most part," he said.

Cisterna predicted that consumers in general will also come to like HST.

"If the Atlantic provinces’ experience back in 1997 was any indication of what’s going to happen (in Ontario and British Columbia), the businesses will pass their savings on to consumers," he said. "There will be more capital for businesses to keep jobs and hire more people, and that’s better for everybody."

The sales tax landscape will change dramatically on July 1. Not only are B.C. and Ontario joining the HST bandwagon, but Nova Scotia is raising its provincial component to 10 percent, bringing the total HST to 15 percent.

Because the provincial component ranges from 7 percent in B.C. to 8 percent in Ontario, New Brunswick and Newfoundland, to 10 percent in Nova Scotia, "place of supply" rules will go into effect to determine which rate applies in various situations.

With regard to services in relation to goods, which includes warehousing, order processing, and distribution, taxes are applied according to the province in which the goods are primarily situated at the time the services are performed.

On freight transportation service, tax would be applied according to the province of destination.

For customs brokerage services on commercial goods, taxes are applied according to the province in which the goods are located at the time of their release. For customs brokerage services on non-commercial goods, however, taxes are applied only if HST is applicable to the goods themselves.

"So if you’re clearing non-commercial goods in Ontario that are going to someone in Nova Scotia, and the Nova Scotia HST applies on that importation by that person, then your brokering service would have that same tax applied."