The Taxman Cometh
Considerations for Charities on the Advent of the HST

by Adam Aptowitzer 

The advent of the HST system in Ontario has been treated with a distinct lack of enthusiasm by charities. On the one hand, as the HST system is based on the GST regime some may feel comfortable with HST as simply being an extension of the GST (the only problem is that the GST is an enigma to most). On the other hand, the silence about the HST in the charities community is in some ways surprising given the now enhanced consequences to directors and charities for misunderstanding the law. Thus, charities need to be more concerned than ever that they properly charge the HST. Below are several pointers for charities as they consider their obligations.

As most charities are aware by now there is a different rebate system in place for the GST and the HST. Specifically, charities will be entitled to a rebate of 50% of the GST and 82% of the HST. So, charities will have to track the GST and HST portions of their expenses separately.

Another interesting aspect of the HST is that the collecting entity charges the relevant HST rate for that province (so for example 8% in Ontario and 0% in Alberta). So some knowledge of the locale of your customers is necessary.

For directors the major issue lies with not properly collecting or remitting taxes. Of course, inherent in this is an understanding of what is a taxable and what is an exempt supply. It would also require some understanding of the minimal thresholds for GST/HST registration. While this is not the venue for a detailed explanation of those rules directors should understand the consequences of not even exploring the issue. Generally, in circumstances where an organization (including a charity) should charge GST/HST and do not, the CRA will assess the organization for that amount. In some circumstances, the directors of a charity can also become personally liable for those amounts. 

When the amount in issue was 'only' 5% of the price the amount (tax, penalty and interest) owing could be high, but now it is a full 8% higher. So charities (and others) have a significantly higher incentive to ensure that they are in full compliance with the law.