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Harmonized Sales Tax (HST)

The Harmonized Sales Tax (HST) applies to the majority of goods and non-employment services purchased by the University.

However, the University is eligible for partial rebates paid on items purchased. For Universities the rebate is 67% of the GST portion of the HST paid and a 78% rebate on the provincial portion (PVAT) of the HST paid.

Therefore, the University claims a total rebate of 9.59% of the 13% HST. This rebate is broken into 3.35% (67% of 5% HST portion paid) and 6.24% (78% of the 8% PVAT portion paid); the net HST cost to the University is 3.41% (13% minus 9.59%).

The buying department’s cost, therefore, is the supplier’s invoice amount, including (usually) HST at 13%, less the HST rebate.

The University’s suppliers (vendors) may handle HST in several ways:

  • include HST in the sales price but not identify the amount of HST therein
  • separately identify the amount of HST
  • not collect (i.e. assess) HST

This section addresses each of these situations, and summarizes the buying department’s role with respect to HST.

Other Available References on HST

Each department was provided with the old University of Toronto Goods and Services Tax Manual, a comprehensive guide to HST. The sections below are an overview of the areas where questions most often arise. The guide for the most part can be used in the same way for HST.  The guide will be updated in late 2016.

In addition, technical expertise on this matter is available at .

HST Assessed and Collected by the Supplier

HST Not Assessed by the Supplier

HST Not Applicable

Summary of Buying Department’s Role

HST Assessed and Collected by the Supplier

When an assessment of HST is indicated, the supplier must provide the HST registration number. This is evidence that the supplier is authorized to collect the tax.

Although not specifically set out in the HST Act, discussions with Canada Revenue Agency indicate that the University has an obligation to report to Canada Revenue Agency any supplier who is assessing HST without a HST registration number.

1. HST Included 

The supplier’s invoice or order form states that HST is included in the sale price. The amount of HST is not specifically identified.

The amount of HST is determined by multiplying the total invoice amount by 13/113.

These calculations are handled automatically by the system (FIS), so the user only needs to ensure the appropriate tax code is used.

2. HST Extra (or “shown”)

HST is separately identified on the supplier’s invoice.

3. HST Rebate 

The cost to the department is the total invoice price less the HST rebate and can be calculated as:

total invoice – (13/113 X .7377 X total invoice)
or simplified: total invoice – (.08487 X total invoice)

HST Not Assessed by the Supplier

This may occur because:

  • HST is not applicable
  • HST is applicable but the supplier is not collecting the tax

HST Not Applicable
There are two categories of purchases which are not subject to HST:

  1. HST exempt

An exempt supply is a supply of goods or services for which there is no requirement to collect and remit HST.

The most common reason for an exemption is the small trader status of the supplier. A supplier has that status if its sales of taxable supply do not exceed $30,000 annually.

  1. Zero-rated supply

A zero-rated supply is a supply taxed at the rate of zero.

See HST Not Applicable below for examples of exempt and zero-rated items.

HST Applicable – Foreign suppliers
The most common situation in which HST is applicable but has not been assessed by the supplier, other than HST exempt situations, is the case of foreign suppliers. This does not mean that all foreign suppliers do not assess HST. Some foreign suppliers are registered and do collect HST.

When goods, as distinct from services, are purchased from a foreign supplier, these items must pass through Customs. Acting as an agent of Canada Revenue Agency, Customs assesses and collects GST where appropriate. Our customs broker (Kuehne & Nagel) will collect the 5% GST portion of the HST and our automated billing program for K & N invoices will self-assess the outstanding 8% PVAT portion of the HST.

Buying departments should always instruct foreign suppliers to include their invoice with the shipment of goods. Customs can then determine whether the supplier is assessing HST. If the supplier is assessing HST but this is not evident, Customs and by extension our brokers K & N may assess it as well, resulting in a duplicate HST cost to the buying department. (also refer to Courier, Brokerage & Freight Payments)

University Approach
The onus is on the supplier to assess and collect HST. Therefore, the University does not self-assess HST except if the University purchases services which are performed outside Canada, but the benefit is realized in Canada these services are HST taxable unless clearly exempt, e.g. small trader exemption.

Where the University does self-assess HST, the cost to the department is the total invoice price plus HST at 13% less the HST rebate. The net calculation is: total invoice x 1.0341.

HST Not Applicable

Zero-rated Purchases
The following are examples of purchases taxed at the rate of zero. Therefore, the seller (the supplier / vendor to the University) is not required to collect HST on these sales.

  • prescription drugs
  • medical devices
  • basic groceries other than alcohol, snack foods, sweetened baked goods, restaurant meals and take-out foods
  • agricultural and fishing supplies including:
    • fresh fish and other marine animals for human consumption livestock,
    • poultry, raw wool and certain agricultural produce
    • certain machinery and equipment designed for farmers or fishermen
  • exports of goods and services
  • international passenger travel services
  • international freight transportation services
  • supplies made to international organizations and officials including diplomats and member of visiting armed forces
  • certain financial services
  • initial sales or importations of precious metals

Exempt Purchases
The following are examples of purchases exempt from HST:

  • goods and services provided by small suppliers
  • health care, child care and legal aid services
  • educational services provided by elementary and secondary schools, publicly funded colleges and universities, and private secretarial schools and business colleges
  • a broad range of supplies of a non-commercial nature by charities, non-profit organizations, municipalities, and federal and provincial governments
  • sales of used residential housing and rentals of residential premises
  • most domestic financial services
  • certain intra-group financial services
  • ferry, road and bridge tolls

Summary of Buying Department’s Role

Supplier’s HST Registration Number
When a supplier invoice/order form indicates that HST is being assessed, ensure the supplier’s HST registration number is provided. If it is not, contact the supplier for the number.

Indicate HST Status
When processing a certified invoice or other non-purchase order related payment in FIS, always indicate the HST status (refer to the Reference Guide – HST Tax Codes).

Note to Departments: The cost of purchases on all FIS reports is net of the HST rebate.

 

 

Last revision: January 8, 2016