HST and GST Quirks You Might Need To Be Aware

The Excise Tax Act has rules that might have an effect on your business. While the GST and the HST are administered by Canada's CRA, they are administered in Quebec under Revenu Quebec (RQ).

1. Intangible property or service (e.g., a consulting service) that you purchase from outside Canada is not eligible for GST/HST. You can purchase a strong>service or intangible asset from outside Canada and are not subject to GST/HST. However, if you buy software or consulting services for a business that is eligible for full input tax credits, you have a legal obligation. This is "imported taxable supply". This is something that the CRA does not assess consumers for in practice, even though it legally could. If you import taxable supplies for your business, however, you cannot claim input tax credit (e.g. Your sales are exempt and the CRA/RQ could find this out when they audit your business and assess you.
2. GST-registered agents who sell goods to principals that are not required to collect tax will be considered to have bought the property from the principal and must collect GST/HST on the entire price charged to customer. Imagine that you have a boat you've used for pleasure and you wish to sell it. The boat is then left with a dealer who sells it to you for a commission. The dealer must collect and remit GST/HST on the entire sale price (not just the commission), even though it would not be required if you were selling the boat yourself.
3. Your business can collect a deposit from customers. However, the GST and HST will not apply until you use it as "consideration" to purchase. According to a Tax Court case (Tendances et Concepts Inc. 2011, 2011), what you believe is a deposit may in fact be a payment on an account. In this case, GST or HST apply from the time you collect the deposit. You must also pay the GST or HST for any amount you invoice once you have invoiced it.
4. If you are selling commercial real property, the purchaser accounts for GST or HST. They also usually claim an offset tax credit. The purchaser doesn't have to pay any tax. For GST/HST purposes, however, the sale is still considered "taxable". Therefore, if you have a purchase and sale agreement that states GST/HST is included in the sale price, then you will receive only 100/105ths to 100/113ths to 100/115ths depending on the province. Careful of how you word the agreement.
5. Although the vacant property is usually exempted when it's sold by an individual there are many exceptions. It will be taxable if the land has been divided into more than two sections. You may have to pay taxes if the land has been rented out. A corporation selling the land is always taxable. A farm with a farmhouse on it is exempt from tax. You should seek professional advice as there are many rules and exceptions.
6. If your business sues a person for breaching the contract and the original contract contained GST or HST then any amount you receive in damages or as part of a settlement will be considered GST-/HST-included. You must pay tax out of the total and may be eligible for an input tax credit. You must ensure that you "gross up” the GST and HST when you settle or claim in these cases. However, you might have already paid GST/HST to the client when you invoiced them. If you need to write off certain amounts, you may be able to use the "bad default" or "credit note” rules in the legislation (ETA Sections 231 and 232), to recover from RQ or CRA the GST/HST that was not collected.