Some GST and HST Quirks

A dozen different GST and HST rules from the Excise Tax Act are here. Some may not be as well-known, but they could have an impact on your business. The GST and HST are administered across Canada by the CRA, but they are administered in Quebec through Revenu Quebec (RQ).

1. You can acquire services or intangible properties (e.g. If you purchase a strong>service or intangible property (e.g., consulting services or downloaded software) from another country, but you don't have to pay GST/HST, then you will be required to self-assess the cost and pay GST/HST to Canada Revenue Agency unless you are purchasing for a business that has full input tax credits. This is an "imported taxable supply" . Although the law allows it, the CRA doesn't in practice assess consumers for this. However, if your business acquires an import taxable supply, you will not be eligible for input tax credits (e.g. Because your sales are exempt, the CRA/RQ might find this and assess your business.
2. A GST-registered agent who sells goods to a principal that is not required to tax is considered to have purchased and sold the property. The agent must collect GST and HST on the total price charged to the customer. Let's say you own a boat that you no longer use for pleasure. It is left with a boat dealer who will sell it on your behalf and take a commission. You would not need to pay GST or HST if the boat was sold by you, but the dealer must collect it and submit it.
3. A "deposit is a payment on account that your business receives from customers. Until you apply it to the purchase, there will be no GST or HST. Based on a Tax Court case, Tendances et Concepts Inc. (2011), what you consider a "deposit", may actually be a payment on account. In which case, the GST or HST will apply as soon as the deposit has been collected. Also, GST and HST are normally "payable" once an amount has been invoiced. This amount must be remitted for the reporting period.
4. If you sell commercial real estate to a GST registered purchaser, the purchaser usually accounts for GST/HST and often claims an offset input tax credit. This means that the purchaser does not actually have to pay any tax. The sale is still taxable for GST/HST purposes. If your purchase and sales agreement states that GST or HST are "included", you will not receive 100/105ths, 100/113ths, or 100/115ths (depending on which province). Make sure you carefully read the agreement!
5. While vacant land can often be sold by an individual without any tax, there are many exceptions. If you have ever divided the land into more parts than two, it may be taxable. It may also be taxable if you rent out the land. The sale of land by a corporation is always taxable. A farmhouse is an exemption if a farm has one-half hectare or more of land. There are many exceptions and special rules, so it is important to seek professional advice.
6. If your company sues someone for breaching a contract, the amount you get as damages or in a settlement is normally GST- or HST–included. This means that you will have to remit tax from the total, while the defendant may be eligible to claim an input credit. In such cases, you must "gross up” for GST/HST in any settlement or claim. You may have already remitted or recognized GST/HST when the first client was billed. You may have to write off any amounts owed. To recover the GST/HST you were unable to collect from the CRA/RQ, you can use the "bad credit" or "credit notes" provisions in the legislation (ETA section 231 and 232).