Ontario Sales Tax

I don't think we have many readers from Ontario, so I thought I'd tell you about what the Ontario government is doing with our retail sales tax.

It's been the subject of a lot of talk around here lately because the Ontario government is bringing in a "harmonized" sales tax starting July 1st.

Currently, and for the past several years, we have had to pay the federal government goods and services tax (the GST) at a rate of 5% on just about anything you buy. You also have to pay 8% in Ontario provincial retail sales tax, however that tax was only on about 85% of what you buy. Things like funeral homes and gym clubs and haircuts and a few other things have always been exempt, but not any more.

The new tax will be administered by the federal government and will be called the HST (harmonized sales tax) and will be at a rate of 13% on almost anything you buy. Groceries, rent, condo fees, prescription drugs, and medical devices are among the items that will remain exempt. Yes, in Canada we pay heavy retail taxes on top of the already inflated price that we pay for goods in the first place.

The bonus is that the Ontario government is mailing out rebate cheques to just about everyone. As a "family" Ruth and I will get $330 this month, another $335 in December, and another $335 in June of 2011 for a total of $1,000.

I'm not one to stand up for the government, but I actually agree with this new tax. From a business perspective, it eliminates the need to figure out two separate taxes, and everything you purchase through your business is now an input tax credit the same way the GST has always been administered. It is a MUCH simpler system.

And, because we don't spend very much money, that $1,000 the government is giving back to us is sure to turn out as a net gain in our particular situation.