News Release Archive
FINANCE--THE HARMONIZED SALES TAX ----------------------------------------------------------------- The Nova Scotia Department of Finance says businesses and consumers should be careful about the tax implications for memberships and other services that go beyond March 31, 1997. The technical paper on the Harmonized Sales Tax (HST) released jointly by the Government of Canada and the three participating provinces on Oct. 23, 1996 sets out the rules for long term service arrangements. Prior to Feb. 1, 1997, people may renew annual memberships and enter into service arrangements without having to pay the Harmonized Sales Tax. The rules require payment for such services or memberships on or before Jan. 31, 1997 in order to remain under the old tax rules. After January 31, memberships and other annual service contracts will have to include the HST on that portion of the contract or membership that goes beyond March 31, 1997. For example, a health club may sell annual memberships until the end of January, free of HST. Memberships and service arrangements must be paid or be due (i.e. actually paid or invoiced with payment due) before the February 1, 1997 deadline. The rules for sales of services to businesses and institutions (ie. anyone not a consumer) are slightly different as there may be a requirement for the purchaser of the service to self-assess. The technical paper sets out detailed rules in these situations. In any case, for payments received after Jan. 31, 1997 or for invoices not paid, and coming due after Jan. 31, 1997, the membership or service contract is pro-rated. For the period Jan. 1 to March 31, 1997, the old rules apply and only the GST is charged. For the part of the membership or service contract that goes beyond March 31, the HST applies at 15 per cent, not the GST at seven per cent. The rules for magazine and newspaper subscriptions are slightly different. In those cases, people have until March 31, 1997 to renew their subscriptions or to start one without having to pay the HST. Subscriptions must be paid before the April 1 deadline, not just renewed or due. The rules in all cases were designed to give consumers and business some time to become informed about how the rules for HST work, before implementation. In many cases it may be to a consumer's advantage to pre-pay memberships and services, but consumers should be certain they want to use the service or membership for the full year, and be comfortable pre-paying that far in advance. There are some cases however, where the consumer is not better off. For instance, cable tv contracts are often pre-paid, but the tax on cable tv and other telecommunications services including internet connections goes down on April 1, 1997. In this case a pre-payment means the consumer may be paying more than a customer who remits monthly. More information on the transition rules as they apply to the HST is available from Revenue Canada at 1-800-959-8286. -30- Contact: Bruce Cameron 902-424-8787 trp Jan. 14, 1997 - 12:45 p.m.