Posts Tagged ‘gst’

So BC is harmonizing PST and GST in 2010

Friday, July 24th, 2009

Yipee!  The Provincial Government and the Federal Government of Canada have worked out a deal to harmonize the PST and GST.

I’ve hated the PST ever since Perceptus Solutions Inc. has had collect and remit PST  (Wow, Perceptus is more than 5 years old!).  For the uninitiated, PST is intimidating to understand, and bothersome to put into practice.

There is a lot of misunderstanding about how much companies will save by harmonizing the PST.  It is absolutely not true that companies will save 7% of their expenses.  It is a topic for another day, but I list some things that Perceptus does and does not do with PST below, and it’ll make it clear that we do not magically gain 7% net profit.  However, many companies will save a lot.  But, more importantly, there’s less paperwork to handle, fewer regulations to puzzle over, and fewer phone calls to the Province to try and figure out what is exempt or not exempt.  This means that BC based businesses can spend more time creating, building, and improving themselves to do things better, cheaper, and faster – things which will help all BC residents in hard to measure ways in the hazy future.

For those who have never  dealt with PST  behind the scenes, I can tell you from both personal experience, that the experiences of some of our customers, that PST has always been a royal pain compared to the GST.

GST in practice: We get charged GST. We charge GST.  We remit the net amount to Ottawa.

  • Perceptus is charged GST on almost all of  our inputs, the ADSL that resell under the IvyDSL.com banner, our computer gear, office supplies, cellphones, automobile expenses, etc.
  • Similarly, we  charge GST on everything we sell to Canadian companies and individuals.  However, our business customers don’t really care, because they also claim GST inputs to net out their GST payments.
  • We send to the federal government the difference between what we collected and what we paid in GST.  It’s easy to calculate, and we’re indifferent to whether GST goes up or down, it just doesn’t significantly affect our bottom line – we just collect on behalf of the government.

PST on the other hand: We sometimes get charged by suppliers. We sometimes don’t get charged.  We sometimes charge our customers. We sometimes don’t charge.  Often, both scenarious are on a single invoice!  We remit to Victoria whatever we happened to charge.  “Huh?” is right.

  • Perceptus is charged PST on some of the things we need to run the business.
    • ADSL that we resell: Excluded.  We are a reseller; however, we had to send documentation of such.  But, any lines we use for our own purposes, we have to calculate separately and self-assess PST.
    • Most gear, and supplies: Charged.  Paper, computers, coffee, cellphones, etc.  The more we use, the higher our PST expenses, and the higher our costs.  That all get’s figured into the prices we quote to our customers.
    • Some, but not all service providers would be charged PST too.  We don’t use many outside services, so I won’t elaborate too much.
  • Perceptus charges our customers on some things but not others.
    • ADSL, under our IvyDSL.com banner, we do charge our customers PST.
    • Website subscriptions and our packaged software are charged PST.
  • Perceptus does not have to charge for other items
    • If we write a custom report, setup a network, design a webpage or other “custom” work, it’s a service, and there’s no PST.
    • Further, if we were to write a custom tool to work with one of our packaged items, e.g. an enhanced feature for Bean Counting, our inventory counting system, we would not have to charge PST on the custom work, but we would have to charge PST on the “packaged” software.
    • If for some reason we were to wholesale a product, we wouldn’t need to charge PST, but we’d need to track our reseller’s PST info.

The list goes on.  It’s maddening.

Yes, harmonizing the PST will initially cause the price of some items to go up for consumers.  Yes, some industries will be negatively affected, such as restaurants.  Yes, I think the provincial government is doing a bit of a tax grab here – I believe other provinces reduced the total harmonized tax by at least a percent when they moved to the HST.  But overall, HST is not a bad thing – granted, we’re  fortunate to be on the side that generally benefits from the HST.   I suspect that the province will try and tip tax revenues back towards businesses from consumers a bit by adjusting personal and corporate income taxes – or at least they should, because the consumers are clearly taking a hit on the HST.

At Perceptus, I’m  just glad to have less regulation to wrap my  head around.  And as a taxpayer, I’m glad that the provincial government has less paperwork to process.

Who knew that Small Businesses can save a bit on GST?

Friday, November 30th, 2007

If you are a small business in Canada and are already using the “Quick Method” of accounting for your GST remittances, then stop here. You’re smarter than I was.

Sometimes one stumbles upon a quarter on the sidewalk. Today, was kind of like that. While browsing for a CRA payroll form, I ended up meandering to the information page about the “Quick Method” option for GST. I’ve noticed the term on the GST forms… and now I wish I had researched it earlier.

In short, if your business qualifies for the Quick Method, you don’t need to remit your GST collected less GST paid. Instead, after registering, you can remit an 3.6% as laid out in this table for 2008 (when GST goes to 5%). You get to pocket the difference. As a bonus, you skip out on a lot of annoying things like adding up all those ITCs, and calculating ITCs for stuff bought from the US and other non-Canadian sources.

  Permanent establishment in a non-participating province Permanent establishment in a
participating province
  Current rate Reduced rate Current rate Reduced rate
Supplies made in a
non-participating province
4.3% 3.6% 2.6% 1.8%
Supplies made in a participating province 11% 10.5% 9.4% 8.8%

source: http://www.cra-arc.gc.ca/E/pub/gi/notice226/notice226-e.html#P198_26328

If you’re a low overhead operation, you’re probably going to save a few bucks. Look into it. You do have to pre-register… so, with the new calendar year around the corner, it’s a pretty good time to consider it.