Harmonized Sales Tax -
Published: April 2010
Content last reviewed: April 2010
978-1-4435-2726-2 (Print), 978-1-4435-2728-6 (PDF), 978-1-4435-2727-9 (HTML)
This information will help Retail Sales Tax (RST) vendors prepare for the Harmonized Sales Tax (HST) in Ontario.
The RST vendor compensation is designed to compensate vendors for collecting RST during the government's fiscal year of April 1 to March 31. General vendor compensation will end as the RST is wound down with the implementation of the HST.
In the 2010 Ontario Budget, the government announced that it proposes to extend compensation to RST vendors of up to $375 for the period April 1, 2010 to June 30, 2010.
Claiming Compensation for Periods Ending after March 31, 2010
All RST returns mailed to vendors for periods ending after March 31, 2010 will indicate AT LIMIT in the Compensation box at Line 5. Do not try to enter an amount in this line. In order to claim compensation, vendors must first determine their total tax collectable on sales during the reporting period and then deduct from that amount the eligible compensation. The result of this calculation must then be entered on line 2 of the RST return.
Proposed compensation limits for the period April 1, 2010 to June 30, 2010 would be:
- If RST charged in the return filing period is $20 or less, claim the amount charged
- If RST charged in the return filing period is more than $20 and less than $400, claim $20
- If RST charged in the return filing period is $400 or more, claim 5% of the amount (up to a maximum $375)
Example: A vendor, X Ltd, files its RST return on a quarterly basis. The last return was filed on March 23, 2010 for the quarter ending February 28, 2010. X Ltd's subsequent return covers the period March 1 to May 31, 2010. During this period it charged RST in the amount of $1,800. X Ltd is eligible to claim compensation of $90 ($1,800 × 5%) on its March 1 to May 31, 2010 return. X Ltd will record $1,710 ($1,800 − $90) on line 2 of the return as shown:
During the month of June 2010 X Ltd charged RST of $660. On its final RST return (for the month of June) X Ltd may claim $33.00 ($660 × 5%) as it has not exceeded the maximum of $375 for the period April 1 to June 30, 2010. To claim the amount for compensation X Ltd must deduct the compensation from the tax collectable ($660 − $33 = $627) and report the net amount on Line 2 of its return.
Vendors must keep accounting records to substantiate their tax return filings.
After implementation of the HST, Ontario will maintain its RST at a rate of 8 per cent on taxable premiums for contracts of insurance and benefits plans. The 2010 Ontario Budget also proposed to continue vendor compensation for vendors collecting RST on insurance premiums. Further information can be found in Tax Tip #4 - Insurance Premiums available on the ministry's website.
For More Information
The Canada Revenue Agency administers the HST. Visit their website at www.cra.gc.ca/gsthst or call 1 800 959-5525 for more information.