GST, PST, EHT & WSIB

1 - GST

Most persons and organizations engaged in commercial activities in Canada who have annual worldwide, taxable sales of more than $30,000 must register for and collect the Goods and Services Tax (GST). All taxi operators must register for GST/HST, regardless of their revenues.

Most goods and services sold or provided in Canada are taxable at the rate of 5% (GST). Certain items, such as sales of basic groceries and prescription drugs are taxable at a rate of 0%. These are referred to as zero-rated goods and services.

A limited number of goods and services are exempt from the GST. The GST applies to most transactions from manufacturing to marketing and sales. Businesses and organizations registered for the GST are referred to as registrants.

A Business must register to obtain a Business Number with a GST account. Registrants can claim a credit to recover the GST that is paid or payable on purchases used to provide taxable goods and services. This credit is called an input tax credit and can be claimed for the GST paid or payable for goods or services acquired or imported for use, consumption or supply in their commercial (taxable) activities.

GST registrants who provide taxable goods or services have to charge and collect the GST on their sales. If the GST collected is greater than the GST paid or payable, the difference is sent to the CRA. If the GST collected is less than the GST paid or payable, a refund can be claimed.

Reasons to register:

1. Unless you are a GST registrant you cannot claim GST input tax credits (GST paid on business expenditures). If you are a GST registrant and your input tax credits exceed GST collected on sales, you may claim a refund of the excess from Canada Revenue Agency. If you're not a registrant the GST paid on expenses is included as part of the expense when computing net income.

2. Not being registered for GST tells everyone that you are running a truly small business. (Your sales are below $30,000 per year) If your customers are other businesses, they expect to pay GST.

3. Companies that are required to register for GST must remit the GST tax to Canada Revenue Agency - even if it has not been collected from the customer. By registering for GST upon starting your business you will eliminate the possibility of inadvertently surpassing the $30,000 threshold and being exposed to penalties and interest charges for noncompliance.

2 - PST

Retail Sales Tax (RST) is a consumption tax. This means that the person who consumes or uses the taxable goods or taxable services pays the RST.

RST is applied to taxable goods, taxable services, admission prices & insurance premiums that people buy or use in Ontario.

Vendors who are registered with the Ministry of Revenue collect the tax when they sell these items or offer these services. By law, they must have a Vendor Permit and are responsible for collecting and remitting the tax.

For Retail Sales Tax (RST) purposes, all goods are taxable unless the purchaser is entitled to an exemption, and all services are non-taxable unless specifically taxed under the Retail Sales Tax Act. The lists below provide some examples of taxable and non-taxable goods and services in Ontario. For more details on how RST applies to specific items, please see the proper RST Guide, Small Business Pointer or Information Notice that may apply to you.
 

Goods that are not taxable

Here are examples of the most common goods that are not taxable to anyone

• Basic groceries such as flour, sugar, spices, breads, cereals, eggs, butter, margarine, cheese, peanut butter, jam, honey, fruits, vegetables, milk and yogurt.

• Food products (except for candies, confections, snack foods and soft drinks)

• Prepared foods sold by an eating establishment for $4 or less.

• Children's clothing (including diapers).

• Footwear costing $30 or less.

• Feminine hygiene products.

• Newspapers.

• Drugs and medicine sold under a doctor's prescription.

• Goods designed solely for people with physical disabilities.

• Vitamins and minerals.

Some goods may be purchased without paying RST

Depending upon who the purchaser is or what the intended end-use of the goods will be.

Examples include:

• Goods purchased for resale, production machinery and equipment purchased for the use of a qualifying manufacturer & goods incorporated into other goods for resale.

Taxable services

Only certain services are taxable in Ontario. They are:

• Telecommunication services (telephone, cable, pay television).

• Accommodation for less than one month (hotels, motels, bed and breakfasts)

• Labour provided to install, assemble, dismantle, adjust, repair or maintain tangible personal property and labour provided to install, configure, modify or upgrade a computer program.

• Contracts for the service, maintenance or warranty of goods, including computer programs.

• Commercial parking.
   

Non-taxable services

Examples of non-taxable services include:

• Dry cleaning.

• Carpet and upholstery cleaning.

• Personal services, such as hair styling, barbering, and beauty treatments.

• Medical and health services.

• Veterinary care.

• Car washing and engine shampooing.

• Labour to install or repair real property or fixtures.

3- EHT

Employer Health Tax (EHT) is paid by employers who have annual total remuneration for the year (exceeding the exemption amount allowed) paid to employees or former employees who:

• Report for work at a permanent establishment of the employer in Ontario, or
  Do not report for work at a permanent establishment of the employer but are paid from or through a permanent establishment of the employer in Ontario.

• Eligible employers are exempt from tax on the first $400,000 of annual remuneration.

• Eligible employers who are associated are required to share the exemption among members of the associated group.

• Employers may be required to pay EHT on remuneration paid by a third party to an employee.

• Employers with annual remuneration of $600,000 or less are not required to pay monthly instalments. These employers will be required to make one payment only, along with their annual returns. Employers with annual remuneration in excess of $600,000 are required to remit monthly installments.

• Eligible employers with a payroll less than the exemption amount for the year are not required to file an EHT annual return for that year.
   

For the first $400,000 of the payroll, eligible employers are exempt from paying the Employer Health Tax.

Tax Rates for Ontario remuneration is 1.95 %

Eligible employers generally include the following:

• Private sector employers;

• Organizations that receive financial assistance from any level of government but are not under the control of government; and

• Crown corporations that are subject to federal income tax under Part I of the Income Tax Act (Canada).

The following employers are not eligible to claim the EHT exemption:

• Public sector employers; including federal, provincial and municipal governments, universities, colleges, school boards and hospitals;

• Crown agencies not subject to tax under Part I of the Income Tax Act (Canada); and

• Employers exempt from income tax under paragraphs 149(l)(a) to (d.6), (h.l), (o) to (o.2), (o.4) to (s.2), and (u) to (z) of the Income Tax Act (Canada), for example, municipal and provincial corporations and certain trusts. 

4- WSIB

Most businesses in Ontario that employ workers (including family members and sub-contractors) must register with the WSIB within 10 days of hiring their first full- or part-time worker. It's the law.

In most cases, you are required to register your company with the WSIB.

There are a few industries that do not have to register. These include:

• Banks, trusts and insurance companies

• Private health care practices (such as those of doctors and chiropractors)

• Trade unions

• Private day cares

• Travel agencies

• Clubs (such as health clubs)

• Photographers

• Barbers, hair salons, and shoe-shine stands

• Taxidermists

• Funeral directing and embalming
   

This is not a complete list as there are more industries that do not have to register. For more information, please contact us or the WSIB directly.

Even if your company is in one of these categories, you can still choose to insure your workers through the WSIB.
 

Optional Insurance for Owners and Executives
If you are a sole proprietor, partner, or executive officer, you are not automatically covered under the WSIB insurance plan. You can, however, apply for optional insurance.

Reason for Registering with the WSIB

• WSIB benefits replace the worker's right to sue the employer for similar benefits.

• The WSIB generally does not consider who is at fault when determining benefits.

• WSIB insurance replaces lost earnings, covers health care costs resulting from work-related injuries and illnesses, and supports return to work.

• Workplace illness and injury doesn't just hurt your workers: it can deprive you of essential staff and can seriously affect your company's productivity. The WSIB and our prevention partners provide numerous training and education programs that help you prevent injuries and illness before they cost you money.

• Getting injured staff back on the job sooner means your business can return to full productivity more quickly. It also means your insurance claim will be smaller and your premiums may be reduced. The WSIB claims management team will help you ensure that your worker gets effective health care and gets back to work as soon as possible.