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Unlocking Ontario's HST Mysteries

Ontario's HST is not just about what you pay, but also what you can claim back.

Demystifying Ontario's HST: From basics to real estate insights

The Fundamentals of HST in Ontario

Ontario uses a special kind of sales tax called the HST, a mix of the federal government's Goods and Services Tax (GST) and the Provincial Sales Tax (PST). In simpler terms, instead of two separate taxes, we have one combined tax that makes buying and selling stuff much easier.

So, businesses find it easier to figure out how much tax they've paid and shoppers get one straightforward tax at the counter. Plus, because Ontario uses HST, doing business with other provinces in Canada that also use HST becomes a breeze.

How Much is HST in Ontario?

If you buy something in Ontario, you usually pay a 13% HST. This 13% is split into 5% from the GST and 8% from the provincial PST.

This combined 13% rate started in Ontario on July 1st, 2010. In 2021, the Ontario government garnered approximately 45 billion Canadian dollars from taxes on products and services. Compared to other places in Canada, our rate sits right in the middle. Some provinces, like Nova Scotia with an HST of 15%, charge a bit more, while others, like Alberta which has no provincial sales tax (only the 5% GST), charge a bit less.

Decoding Ontario's Retail Sales Tax (RST)

In Ontario, there's more than just the harmonized sales tax (HST) to think about when buying stuff. While many items have HST on them, things, like used cars, boats, planes, and insurance, get charged a different tax called the Retail Sales Tax (RST). The cool thing about RST is all the money collected from it stays right here in Ontario. It doesn't get shared with the federal government like HST does.

If you're buying a used car, you'll pay a 13% RST when you get it registered at a Service Ontario Center. They'll calculate this tax on your price or the car's standard "Red Book" value - whichever is higher. And just a heads-up: every time a used car is sold in Ontario, RST gets charged, even if previous owners already paid some HST.

But if you're shopping for a brand-new car, boat, or plane, you'll see the 13% HST added to your bill right when you buy it.

Navigating the Waters of Ontario HST Exemptions

Ontario's financial landscape, governed by the "Canada Revenue Agency", is dotted with a myriad of sales taxes. Central among them is the "HST Ontario" - a harmonized blend of the Goods and Services Tax (GST) and the provincial sales tax. This "harmonized sales tax" is crucial for many transactions, but it’s also accompanied by exemptions that consumers and businesses must be aware of.

In basic terms, HST exemptions are specific goods or services that aren’t charged the standard HST rate in Ontario. This means the typical "GST HST" blend, which currently stands at 13%, doesn’t apply when you buy an exempt item.

The "harmonized sales tax" exemption list in Ontario is detailed, but some notable mentions include:

  • Basic Groceries: While that candy bar might attract HST, your basic fruits, vegetables, meat, and dairy typically don't.
  • Prescription Drugs: Medications prescribed by a doctor and dispensed by a pharmacist usually fall under the exemption umbrella.
  • Specific Medical Devices: Think of items like hearing aids or walking aids.
  • Child Care Services: Provided the service is for children 14 years old and younger.

Why does Ontario have these exemptions? The primary reason is to reduce the financial burden on essential goods and services, ensuring they remain accessible to everyone.

For businesses, understanding these exemptions is crucial. It ensures accurate pricing, billing, and compliance with provincial regulations. Misapplying HST can lead to both customer dissatisfaction and regulatory penalties.

On the other hand, consumers benefit from knowing these exemptions as it helps them manage their budgets effectively and challenge any discrepancies they might encounter during shopping.

Ontario's Sales Tax Earnings: A Glimpse into HST and Beyond

Sales taxes, particularly the HST in Ontario, form a crucial pillar of the province's financial infrastructure. In the 2019 fiscal year, the "Canada Revenue Agency" reported that combined revenues from the "HST Ontario" and the "provincial sales tax" (RST) are anticipated to hit $28.1 billion. This formidable sum accounts for 26.5% of Ontario's entire tax revenue. Astonishingly, this figure eclipses the combined totals of the Corporation Tax, Health Premium, and Education Property Tax.

As the significance of the "services tax" continues to grow, it's evident how pivotal sales taxes are in shaping Ontario's fiscal landscape.

Real Estate and HST: What Homebuyers and Sellers Need to Know

Real estate transactions can be intricate, and when you introduce taxes like the HST into the mix, things can feel even more complex. However, with a clear understanding of how HST applies to real estate in Ontario, both homebuyers and sellers can make more informed decisions.

New Homes vs. Resale Homes: 

The most significant distinction lies between new and resale homes. New homes are generally subject to HST, whereas resale homes usually are not. However, when purchasing a new home, buyers may be eligible for the Ontario New Home HST Rebate, which can significantly offset some of the upfront costs.

A qualifying new home purchaser can apply for a rebate on both the PST & GST. The breakdown is as follows: They can get back 75% of the PST, capped at $24,000 (achieved when the price is $424,850). For homes priced under $350,000, there's a 36% GST rebate, maxing out at $6,300. For homes priced between $350,000 and $450,000, a decreasing scale is used for the rebate. No rebate is available for homes priced over $450,000.

Land Transfers: 

If you're buying land with the intention of building a home, be cautious. Vacant land can attract HST, especially if it's seen as an investment property or if a corporation owned the land before the sale.

Real Estate Commissions: 

For sellers, it's essential to remember that real estate commissions are typically subject to HST. So, when budgeting for the costs of selling your home, factor in the HST on the commission you'll pay to your real estate agent.

Rentals and Leases: 

There's good news if you're a business owner considering turning your property into a rental. Residential rents are generally exempt from HST. However, commercial rents often attract HST, so landlords must be clear on their property's classification.

Rebates and Incentives: 

The federal government also often provides rebates, like the aforementioned Ontario New Home HST Rebate, to help offset HST costs in the real estate sector. Being aware of these can result in significant savings.

Ontario's HST Input Tax Credits Simplified

When diving into the world of "harmonized sales tax" (HST) in Ontario, you'll encounter "input tax credits" or ITCs. These are a handy tool for businesses. Simply put, ITCs let businesses get back the HST paid on goods and services used in their operations. So, when you hear about the "services tax" in Ontario, remember it's not just about what you pay, but also what you can claim back.

The federal government set this up to help businesses offset some costs. With proper guidance on how to utilize these credits, navigating Ontario's sales tax becomes much clearer. Think of it as your business's tax-back buddy!

Sailing Smooth with Pine: Your Guide to Ontario's HST

Trying to figure out the "harmonized sales tax" or HST in Ontario can feel like a big puzzle, especially when you're dealing with things like buying a house. There's a lot to wrap your head around - from what the HST rate is, what stuff it doesn't apply to, and how it works when buying or selling a property.

But here's the good news - you've got Pine in your corner. We're all about making things like mortgages and the "services tax" easier to get. Our Pine team knows the ins and outs of HST in Ontario, so you can trust us to help you out. If you're buying your first home, applying for a mortgage, we've got your back.

Because when it comes to taxes, it's not just about crunching numbers. It's about making smart choices for your future. And with Pine helping you out, that's a future you can look forward to.

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