RST Information Notice, May 2004

• On May 18, 2004, a number of measures relating to the Retail Sales Tax (RST) Act and its regulations were announced in the 2004 Ontario Budget.  The legislation must receive passage by the Legislature and Royal Assent to become law.

Destination Marketing Fee

A number of hotels in Ontario charge a 3% Destination Marketing Fee (DMF). The DMF forms part of the "fair value" of the charge for transient accommodation and as such, RST applies to the DMF at a rate of 5%. The proposed measures would exempt the DMF from RST for a one-year period.

The temporary exemption would be effective for DMFs billed on or after May 19, 2004 and before May 19, 2005, provided the following conditions are satisfied:

• the fee is forwarded by the vendor to a not-for-profit corporation or not-forprofit agency for the exclusive purpose of promoting tourism in the region or municipality in which the accommodation is located,
• the fee is shown as a separate item on the purchaser's invoice or receipt, and
• the fee does not exceed 3% of the fair value of the accommodation.

Rebate for Alternative Energy Systems

The Ontario government plans to introduce legislation to expand the current RST rebate for solar energy systems to wind energy systems, micro-hydroelectric systems and geothermal heating/cooling systems installed in residential premises.

Rebates would be available for qualifying alternative energy systems purchased on or after March 28, 2003 and on or before November 25, 2007.

Transfer of Assets and Partnership Rules

Regulation amendments to update RST rules relating to transfers of assets between related corporations have been developed. In addition, rules for the transfer of assets between partnerships and their principals would be regulated and would be consistent with the rules for related corporations. The proposed rules will be posted on the Ministry of Revenue website for industry comment with a view to finalizing the regulation amendments in the fall of 2004. The proposed effective date would be the release date of the draft regulations.

Purchase Exemption Certificates

The government proposes to proceed with changes to the RST Purchase Exemption Certificate (PEC) system. The proposed changes will reduce red tape and compliance costs for vendors and taxpayers when claiming an exemption from RST.

PECs would no longer require:

• a signature,
• a list of exempt items, or
• an expiry date.

The proposed measures would also allow farmers to use a farm association identification card in place of a PEC when purchasing eligible farm equipment and supplies exempt from RST.

Rebate for Vehicles Purchased to Transport Persons with Permanent Physical Disabilities

The government is proposing to transform assistance provided to persons with physical disabilities. RST rebates would no longer be provided for motor vehicles, purchased or leased on or after May 19, 2004, to transport persons with permanentm physical disabilities.

RST rebates would remain available for qualifying vehicles purchased on or before May 18, 2004, provided delivery occurs before August 1, 2004.

RST rebates would also remain available for qualifying vehicles acquired through long-term lease contracts entered into on or before May 18, 2004, provided the purchaser takes delivery of the vehicle before August 1, 2004.

As a more effective way of delivering assistance to persons with physical disabilities, increased funding will be provided for the Home and Vehicle Modification Program funded through the Ministry of Community and Social Services.

Equipment designed solely for the use of people who are chronic invalids or have a physical disability remains exempt. Items such as wheelchair lifts, ramps and tiedown systems installed in a vehicle to accommodate a wheelchair, or hand controls designed to assist drivers who have a physical disability are examples of items that remain exempt from RST. See Ontario Retail Sales Tax Guide - 802 Exempt Items for People With Physical Disabilities for more information.

Waivers

The proposed measures include a waiver provision consistent with the existing legislation in the Corporations Tax Act and the Employer Health Tax Act. Waivers ensure that the start date and end date of an audit period remain constant, regardless of the date on which the audit is either started or completed. This allows taxpayers time to get additional information to support their position, without a concern that an estimated assessment will be issued in the interim.

Dissolution of Corporate Charters for Unpaid Tax Debts

In order to improve tax collection, amendments to the Business Corporations Act will be proposed to allow for the dissolution of a corporation's charter and the withholding of clearance certificates from the Ministry of Government Services for revivals, transfers of assets or dissolutions where tax is owing to the Minister of Finance under the Retail Sales Tax Act, and other statutes administered by the Minister of Finance.

For More Information

For more information, please contact the nearest Ontario Ministry of Revenue Tax Office listed under Taxes - Provincial (Retail) Sales Tax in the blue pages of your telephone directory, or visit our website at www.ontario.ca/revenue.

© Queen's Printer for Ontario, 2004

ISBN 0-7794-6344-7