Russell & Ward

"The provincial government has provided rules/guidance on how it will transition to the implementation of the proposed Harmonized Sales Tax." 

As of May 1, 2010, the Ontario Harmonized Sales Tax will generally apply to prepayments, but only to the extent that goods and services are provided on or after July 1, 2010.

Ontario HST won't apply to apply goods and services as of May 1, 2010. It only applies to goods and services that straddle or are used after the July 1st implementation date.

Here are some handy HST transition examples:

• If someone purchases landscaping services for May 1, 2010 - September 30, 2010, GST is charged for May and June and HST is charged for July onwards.
• If someone purchases Stratford Shakespeare Festival tickets after May 1, 2010, and the tickets for a performance in August, they will pay HST on the tickets.
• If someone purchases a one-year gym membership on May 1, 2010, they are charged GST for May and June and HST for July - onwards. Ontario's transitional rules are the same as those in British Columbia and are similar to those used in the Atlantic Provinces and Quebec, as well as those used when the GST was introduced.

General HST Transitional Rules for Services:

The HST will generally apply to a service to the extent that the service is performed on or after July 1, 2010. The HST will generally not apply, however, to a supply of a service if all or substantially all (90 per cent or more) of the service is performed before July 2010.

• In May 2010, a person pays for seasonal yard maintenance service, 50 per cent of which will be performed after June 2010. The HST would apply to 50 per cent of the consideration for that service and the supplier would account for the Ontario component of the HST in the GST/HST reporting period of the supplier that includes July 1, 2010.

Leases and Licences

The Ontario HST will generally apply to a supply of property by way of lease, licence or similar arrangement for the part of a lease interval that occurs on or after July 1, 2010. The HST will not apply to a supply of property by way of lease, licence or similar arrangement if the lease interval begins before July 2010 and ends before July 31, 2010.

• On May 1, 2010, a lease payment becomes due and is paid for a site in a recreational campground. The lease interval is six months (May 1, 2010 through October 31, 2010). The part of the payment for the months of May and June would not be subject to the HST but the part of the payment for the months of July, August, September and October would be subject to the HST.

HST and Residential Housing

The Ontario HST will apply to a builder's sale of a newly constructed or substantially renovated residential complex where the written agreement of purchase and sale is entered into after June 18, 2009, and both ownership and possession are transferred after June 2010.

If either ownership or possession is transferred to the purchaser before July 2010, the HST will not apply.

New Housing Rebate

An Ontario new housing rebate will be available for some of the provincial part of the HST paid by an individual on the purchase of newly constructed or substantially renovated housing for use as the primary place of residence of the individual or a relation of the individual.

The new housing rebate will be equal to 75% of the provincial part of the HST paid, up to a maximum Ontario rebate amount of $24,000. It will be available for the same types of residential properties for which a GST new housing rebate is currently available.

• For a $500,000 new home, once the new housing rebate take effect on July 1, 2010, the Ontario portion of the HST would be $40,000 and the Ontario new housing rebate would be $24,000, resulting in a net tax to the homebuyer of $16,000 for the provincial portion of the HST. Some Special Transitional Rules

Subscriptions to Magazines

• No HST if paid before July 1, 2010

Prepaid Funerals

• No HST if contract entered into in writing before July 1, 2010

Passenger Transportation Services

• No HST if continuous journey begins before July 2010

Freight Transportation Services

• No HST if continuous freight movement begins before July 2010

Passenger Transportation Passes

• No HST if pass period begins before July 2010 and ends before
  August 2010

Small Supplier Threshold

To reduce the administrative burden and complexity for small business, Ontario will parallel the GST small supplier threshold. Businesses with total taxable sales of $30,000 or less based on four previous calendar quarters ($50,000 or less for a public service body) will not be required to register for GST/HST purposes and collect the HST, subject to limited exceptions. Those that choose not to register will not be required to file a HST return. Those that choose to register will collect the HST and will be eligible to claim ITCs.