HST FAQs

1. When do I charge HST?

13% HST should be charged on most sales, whether to consumers, businesses or to other dealers. There are special rules for sales to Status Indians, and out-of-province purchasers, covered later in these FAQs

2. When do I pay HST?

You pay 13% HST on most items, including inventory, you purchase from other HST registrants, including dealers. There are special rules for vehicles purchased outside of Ontario where delivery is taken outside of Ontario, covered later in these FAQs.

3. Can I claim back HST paid out?

Yes, you can claim back an Input Tax Credit on HST paid for anything purchased for business use, including vehicles purchased for re-sale. There are special rules that restrict the amount of Input Tax Credit that may be claimed on certain non-inventory products and services for businesses with over $10 million of annual taxable sales. See Question 8 below.

4. How do I claim ITCs?

ITCs are claimed in the same way they were claimed when Ontario was a GST province. The total HST paid in a given HST remittance period is added up and deducted from the HST collected on taxable sales for that period and deducted from the amount of HST to be remitted. If the total of ITCs is higher than the total HST on taxable sales, you can claim a refund from Canada Revenue Agency.

5. What are the Rules for Sales to Status Indians?

In order to qualify for any tax exemption, the customer must have a Certificate of Indian Status Card, issued by the federal government. You should record the Status Indian’s Registry Number or Band Name, and keep a photocopy of the card on file.

Sales, leases or repairs performed for Status Indians will be automatically exempt at the point of sale from the 8% provincial portion of HST, meaning that you should charge 5% tax if the Status Indian takes delivery off-Reserve.

Vehicles and parts delivered to a Status Indian purchaser on Reserve will be fully exempt from the 13% HST.

Delivery to Reserve

When delivering a vehicle or parts to a Reserve, it’s a good idea to keep all of the following in case of a future audit.

 

• A dated receipt, showing a Reserve address, for gas or something else purchased on Reserve.

 

• Photos of the Status Indian customer and the vehicle on the Reserve with someone from the dealership

 

• A log recording the distance from the dealership to the Reserve

 

6. What are the Rules for Sales to out-of-province purchasers?

Put simply:

If delivery takes place in Ontario, then 13% HST will apply to the sale, regardless of where the customer lives.

If delivery takes place outside of Ontario, the tax applicable to that province should be charged.

Delivery takes place where the customer is considered to take possession of the vehicle.

• If the customer picks the vehicle up in Ontario and drives it home, delivery takes place in Ontario

• If the vehicle is shipped out-of-province with the buyer shown as consignor on the bill of lading, delivery takes place in Ontario.
It does not matter who actually pays the shipping invoice.

• If the vehicle is shipped out of province with the selling dealer shown as consignor on the bill of lading, then delivery takes place in the destination province.
It does not matter who actually pays the shipping invoice.

British Columbia (12%) and Nova Scotia (15%) have different HST rates from Ontario and the other HST provinces. Here’s a summary of GST and HST rates in all Canadian jurisdictions.

Out-of-province purchasers from non-HST provinces and territories may apply for a refund of the 8% provincial portion of the HST paid in Ontario from Canada Revenue Agency, once they have registered the vehicle in their home province and paid any applicable provincial taxes.

 

7. What are the Rules for purchasing vehicles in another province?

Just like selling to an out-of-province purchaser, if you buy a vehicle from a dealer or other GST/HST registrant in another province, the applicable tax (HST or GST) and tax rate will depend on where delivery is considered to have taken place. If the seller is not a GST or HST registrant, (i.e. a private individual) there is no tax.

• If you pick up the vehicle in another province and drive it back to Ontario, delivery takes place in the other province and that province’s tax rate applies

• If you arrange for the vehicle to be shipped back to Ontario and your name shows on the bill of lading, delivery takes place in the other province and that province’s tax rate applies

• If the vehicle is shipped by the seller out of their province to you in Ontario with the seller’s name showing on the bill of lading, then delivery takes place in Ontario and 13% HST should be paid

See the Chart in Question 6 for the various tax rates in each province and territory.

8. What are the ITC restrictions for businesses with over $10 million in taxable sales?

Dealers and all businesses with annual taxable sales greater than $10 million (considered to be “large businesses” by the government) are restricted on the amount of Input Tax Credits (ITCs) they can claim.

For the first five years of HST, ITC claims on the items listed below will be restricted to a 5% ITC, even though you will pay the full 13% HST when purchasing the items.

• Electricity, natural gas, or any energy used for air conditioning, lighting, heating or ventilation.
• Telephone services, voice mail, conference calls and long distance calls. However, Internet access and toll-free numbers and web hosting will not be subject to the restrictions.
• Road vehicles weighing less than 3,000 kilograms, Such as cars, minivans and pick-up trucks, but not trailers and semi-trailers. THE RESTRICTION DOES NOT APPLY TO VEHICLES PURCHASED BY DEALERS FOR RE-SALE
• Fuel (other than diesel fuel) to power a vehicle weighing less than 3,000 kilograms that is required to be registered for use on public highways
• Food, beverages and entertainment that are only 50 per cent deductible for purposes of the Income Tax Act.

After the first five years of HST implementation, ITCs relating to restricted items will be phased in over a three-year period, so that by July 1^st, 2018, full ITCs can be claimed.

• in the sixth year, (starting July 1, 2015) a business that had been subject to the restrictions will be able to claim a 25% ITC on the restricted items (25% of the restricted portion, amounting to 7% in total);
• in the seventh year (starting July 1, 2016), the business will be able to claim a 50% ITC (9% in total);
• in the eighth year (starting July 1, 2017), the business will be able to claim a 75% (11% in total);
• in the ninth year (starting July 1, 2018), the business will be able to claim full ITCs (the full 13%)

These restrictions do not apply to dealers with less than $10 million in annual taxable sales in the fiscal year ending prior to July 1^st, of any given year. Dealers under that threshold will be able to claim the full 13% ITC on all items on which HST is paid that are purchased for commercial use.

9. Does Ontario Retail Sales Tax (ORST) still apply to the sale of a vehicle?

Generally, ORST is gone. However, since HST does not apply to insurance premiums, dealers who offer optional life, health or disability insurance to customers who finance or lease vehicles still need to charge 8% ORST on the cost of the insurance.

ORST vendor accounts were closed automatically after June 30^th, so if you sell life, health or disability insurance, you need to notify the Ministry of Revenue in order to reinstate your ORST account.

Call the Ministry at 1-866-668-8297. Select the Retail Sales Tax option and hit zero to speak with a person.

Give them your old ORST account number and tell them you are a motor vehicle dealer that sells insurance and that you need an ORST account. The Ministry will assign you a new account. Your account number will continue to be based on your BN number, but the final six digits will change. You will continue to receive remittance forms from the Ministry and will continue to be eligible for compensation for collecting and remitting ORST, as is presently the case.

If you don’t offer life, health or disability insurance products, you do not need to re-register as an ORST vendor.

Extended warranties, rust proofing, gap protection, etching and other optional add on products are not considered to be insurance and are subject to 13% HST.

10. What about private sales?

Sales by private individuals, including curbsiders, are subject to a 13% provincial sales tax at the licence office. Finally, a level tax playing field for dealers!

 

Confused about any of this? Contact the UCDA and we’ll do our best to help clarify things for you.