HST
HST FAQs
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.
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.
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.
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.
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.
You can see what the different Certificate Indian Status Cards look like here.
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, and;
- A log recording the distance from the dealership to the Reserve.
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.
Some provinces have different federal tax rates from Ontario. Here’s a summary of GST and HST rates in all Canadian jurisdictions:
Nova Scotia 14
Prince Edward Island 15
New Brunswick 15
Newfoundland 15
Ontario 13
Alberta 5
British Columbia 5
Manitoba 5
North West Territories 5
Nunavut 5
Quebec 5
Saskatchewan 5
Yukon 5
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.
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 above for the various tax rates in each province and territory.
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 1st, 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 1st, 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.
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 30th, 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, etching and other optional add on products are not considered to be insurance and are subject to 13% HST.
Private sales are subject to a 13% provincial sales tax at the licence office. Finally, a level tax playing field for dealers!
HST Selling Out of Province
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 Federal Tax (ie. HST or GST) 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.
13% HST should be collected on any shipping charges for which the dealer separately invoices the customer.
Some provinces have different federal tax rates from Ontario. Here’s a summary of GST and HST rates in all Canadian jurisdictions:
Delivered To Tax rate to Charge %
Nova Scotia 14
Prince Edward Island 15
New Brunswick 15
Newfoundland 15
Ontario 13
Alberta 5
British Columbia 5
Manitoba 5
North West Territories 5
Nunavut 5
Quebec 5
Saskatchewan 5
Yukon 5
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.
Remitting HST for Off Reserve Sales to Status Indians
Vehicles sold to Status Indian purchasers who take delivery at the dealer’s premises (“Off-Reserve”) are exempt from the 8% provincial portion of the HST … meaning the dealer should only collect and remit 5% tax on the sale.
However, dealers must report the full amount of HST that would normally be collected (13%) on Line 105 of their HST remittance form. The 8% provincial portion of the HST that was not charged to the Status Indian should be shown on Line 111 (the Rebates line) and this amount should then be subtracted from the Net Tax on Line 109 to show the balance owing on Line 113.
Here’s a simplified example of how this would show on a remittance form. For the purposes of this example, the sale of one vehicle for $10,000 is shown. For simplicity, no Input Tax Credits (ITCs) are shown in the example. Normally, ITCs would be deducted on Line 106 to get the Net Tax on Line 109.
Total GST/HST (Line 105) $1,300 (13% of $10,000, though only 5% was actually collected)
Net Tax (Line 109) $1,300
Rebates (Line 111) $800 (the amount of HST the Status Indian did not pay)
Balance Owing (Line 113) $500 (amount remitted to CRA)
Dealers who do not file electronically using NETFILE, must also complete the appropriate sections of CRA Form 189 (Rebate Form) to show the amount of the rebate from Line 111 and send this form in with their remittance.
Dealers should check off the box for Code 23 in Part B of the Form and complete Parts A, C (Section II only) and E.
It is important to note that dealers will remit only the amount of HST collected (5% of the sale price). CRA will not actually issue a rebate. However, CRA expects dealers to complete remittance forms this way. Failure to do so could lead to penalties being charged, to a maximum of 10% of the misreported amount.
This process does not apply to vehicles sold and delivered to a Status Indian on a Reserve. No HST is charged and none is reported in that case.
DIPLOMATS
Diplomats must pay HST when they buy a vehicle, however, some may be eligible to apply for a HST rebate on the HST they pay. The diplomat may apply to the Canada Revenue Agency for a refund, but the dealer is responsible for collecting and remitting it. There is no diplomatic exemption for HST.