HST rebates for non-profit organizations

On July 1, 2010, purchases in Ontario will be subject to the Harmonized Sales Tax (“HST”), a single value-added tax, rather than the federal Goods and Services Tax (“GST”) and the provincial Retail Sales Tax (“RST” – commonly referred to as “PST”).   

The HST is administered by the Federal government and generally follows the rules for GST, however there is a special distinction for public service bodies (PSBs) where the federal portion and Ontario portion of HST must be distinguished separately.

In an attempt for the transition from RST to HST to be economically neutral for PSBs the Ontario government, based on their studies, will offer rebates to PSBs that have different rates than the rebates offered by the federal government. 

‘Qualifying non-profit organizations’ are those which receive 40% or more of their funding from government, either directly or through government agencies. This 40% test must be met either in the current year or as an average over the two preceding years. (Note: if government funding is less than 40% in the current year and as an average over the two preceding years, no rebate is available).

Practical considerations

On May 1^st, suppliers will be required to charge HST on the portion of goods or services that are deliverable after July 1^st.  Public service bodies generally supply exempt services, however should a mix of services be provided, invoicing must be changed over to accommodate this requirement at May 1^st and point of sale terminals updated at June 30^th.  

Consider purchasing RST exempt items prior to July 1^st to avoid the additional tax that will be subject under the harmonized tax.  Consider this additional tax in cashflow budgeting as there will be an additional cost for some items and a timing difference between when the tax is paid and the rebate.

For a detailed analysis of how your non-profit organization’s rebates will be affected by the transition to HST, please contact your RLB advisor.