Harmonized Sales Tax -
Tax Tip
7
Published: November 2010
Content last reviewed: June 2011
ISBN:
978-1-4435-4713-0 (Print), 978-1-4435-4715-4 (PDF), 978-1-4435-4714-7 (HTML)
This information will help small businesses understand if they are eligible for a small business transition support payment (SBTSP) and explain how the support payment will be delivered to them. This support payment has been commonly referred to as the "Small Business Transition Credit." This has been updated from the version dated November 2010.
The Ontario government is providing one-time transition assistance to help small businesses offset costs incurred in making changes to their point-of-sale and accounting systems in order to collect the Harmonized Sales Tax (HST) that came into effect in Ontario on July 1, 2010.
The general transitional rules for the HST were released in October 2009 to assist businesses and consumers in the move to the HST. As part of the transitional rules, starting May 1, 2010, the HST generally applied to consideration that became due, or was paid without having become due, for property and services provided on or after July 1, 2010.
Businesses are reminded that all necessary changes to their accounting and point-of-sale systems should have been made to ensure that the HST is properly charged and paid, and to reduce the potential for costly errors and oversights.
Systems that required changes may have included:
- point-of-sale terminals, cash registers, computer software and websites;
- invoices, sales receipts, purchase orders and expense reports;
- special codes for Ontario's point-of-sale rebates; and
- the ability to track restricted/non-restricted Input Tax Credits, federal/provincial components of HST.
Eligibility for the Support Payment
In order to qualify for a transition support payment, an eligible business must:
- not be a listed financial institution under the Excise Tax Act (Canada);
- carry on business in Ontario and have been a GST/HST registrant on July 1, 2010;
- make GST/HST taxable supplies (including zero-rated supplies) in the course of carrying on business;
- have a premises in Ontario where it conducts its business; and
- have taxable revenue of less than $2 million in a 12-month period.
"Taxable revenue" is the amount of sales and other revenue for that period for the purposes of the Excise Tax Act (Canada), and required to be reported by a business to the Canada Revenue Agency (CRA).
For each business, the Ministry of Finance will determine taxable revenue using the most recent 12-month period ending on or after January 1, 2009 for which adequate financial information is available from the CRA. This means that the appropriate 12-month period will be determined on a case-by-case basis, based on the financial information reported by a business to the CRA.
Eligible businesses will qualify for a transition support payment of up to $1,000 as outlined in the following table:
| Taxable Revenue for the 12-Month Period | Amount of Transition Support Payment |
|---|---|
| 60,000 or less | $300 |
| Over 60,000 and up to and including $200,000 | 0.5% of taxable revenue for the 12-month period |
| Over $200,000 and less than $2 million | $1,000 |
Delivery of Support Payments
Beginning in the fall of 2010, Ontario will automatically calculate the SBTSP amounts and send cheques to eligible businesses once taxable revenue information for a 12-month period ending on or after January 1, 2009 has been provided to the CRA.
Reporting the Payment as Income
The SBTSP is taxable for income tax purposes and should be reported as taxable business income.
Although the SBTSP is not consideration for a supply of a good or a service, it is considered to be “other revenue” for GST/HST reporting purposes. Registrants remitting net tax using the regular method of accounting for GST/HST (not the Quick Method) are required to include the amount on line 101 of their GST/HST return that covers the reporting period in which the payment was received.
If you have questions regarding “taxable business income” or “other income” please contact the CRA.
For More Information
For information on small business transition support payments, call the Ministry of Finance at 1 866 ONT-TAXS (1 866 668-8297), Teletypewriter (TTY): 1 800 263-7776, or visit our website at ontario.ca/finance to obtain the most current version of this tax tip.
For general information on the introduction of the HST in Ontario and the wind down of the RST, call Ontario's Budget hotline at 1 800 337-7222, Teletypewriter (TTY): 1 800 263-7776, or visit ontario.ca/taxchange.
The Canada Revenue Agency is your source for information about GST/HST. Visit the CRA’s website at cra.gc.ca/gsthst or call 1 800 959-5525 for general enquiries or 1 800 959-8287 for rulings.
