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Ontario Government Clarifies HST Rules

Death and taxes may be the only certainties in this world, as the saying goes, but Ontario and British Columbia are giving a break of sorts to people who pre-pay for funeral services before the harmonized sales tax kicks in.

Ontario’s 13 per cent HST, once it takes effect next July, will be placed on many items currently only subject to the eight per cent provincial sales tax, including heating oil, haircuts, and funerals.

Anyone in either province who pays for funeral services, including a burial plot, before July 1, 2010, will not have to pay the HST, Ontario’s revenue minister said Thursday.

“A pre-paid funeral is probably the most stark example of how you may pay for something today and not take delivery of that service for maybe decades,” John Wilkinson said.

“The funeral services businesses had been talking with our government about a transition rule that’s very clear.”

Ontario unveiled transitional rules Thursday to clarify for businesses exactly which tax would apply to which goods and services when the customer pays before July 1, 2010.

The rules will be the same in B.C., which is planning to bring in a 12 per cent HST in July, said Wilkinson. They are based on the experiences of other provinces that harmonized sales taxes with the goods and services tax.

“Business was clear that they wanted Ontario and B.C. to have mirror transitional rules for both provinces because a lot of companies are national and deal in both provinces,” he said.

“Businesses now have the clarity they need so that they can understand, based on transactions and when the happen, which tax they’re to collect and to pay to which government.”

The HST will also not apply to subscriptions that are fully paid before the July 1 deadline for newspapers, magazines and other publications.

In addition, the 13 per cent single sales tax would generally not apply to any pre-paid, round-trip journeys as long as the travel begins before the new tax rules kick in.

“If you start the trip before July 1 then it’s the old rules,” said Wilkinson.

However, Wilkinson said people planning a major vacation for after July 1, 2010 can still escape the HST as long as they pay for the trip before next May.

The HST will generally apply to all pre-payments that start on May 1, 2010 or after for goods or services that will be provided after July 1, 2010.

“The general rule is if you purchase something before May 1, even if you’re going to take delivery after July 1, there’s no HST,” he said.

The transitional rules also provide for a rebate if the PST is paid on construction materials bought before July 1, 2010, but used in residential work after that date.

Wilkinson, the Liberal government’s salesman on the harmonized sales tax, said people’s opposition seems to fade when they hear it’s part of a tax reform package that includes cuts to personal and corporate taxes.