Harmonized Sales Tax Increases in Prince Edward Island
As of Oct 1, 2016, Prince Edward Island increased its harmonized sales tax (HST) rate from 14% to 15%. This shift mirrored recent HST increases in New Brunswick as well as Newfoundland and Labrador. HST in Prince Edward Island HST came into effect in Prince Edward Island on April 1, 2013. Prior to this date, the province levied provincial sales tax, and Canada’s federal goods and services tax. The HST replaces these two taxes with a single tax that harmonizes the provincial and federal taxes. As of 2016, the 15% rate consists of 5% federal GST and 10% provincial tax.
For example, if you buy a taxable item in Prince Edward Island for $100, you pay $15 in tax, bringing the total to $115. This is $5 in GST for the federal government and an additional $10 in tax for Prince Edward Island.
Taxable Versus Zero-Rated Goods and Services
Similar to the rest of Canada, most property and services are taxable in Prince Edward Island. As a result, HST applies to the following types of purchases:
- New houses
- Commercial real estate
- Shoes Advertising
- Taxi and limo services
- Legal and accounting services
- Hotel accommodations
- Soft drinks, candy, and potato chips
Similarly, the government also outlines a number of goods which are zero-rated. This means these items are taxed at a rate of 0%:
- Basic groceries
- Farm livestock
- Agricultural products
- Medical devices such as hearing aids
Paying and Charging HST in Prince Edward Island
Consumers pay HST on most products and services they purchase in Prince Edward Island, and business owners are responsible for charging HST. If you are a business owner, sole proprietor, or freelancer who provides taxable services or supplies in Canada, you must register for a GST/HST account, unless you are a small supplier. You may register online with the Canada Revenue Agency’s Business Registration Online service.
Alternatively, you may register for an account through the mail using Form RC1A, Business Number – GST/HST Account Information. You need a business number to fill out that form. If you don’t have a business number, you may request one using Form RC1, Request for a Business Number.
To determine if you are a small supplier, look at the revenues you have collected on taxable supplies or services in the last four quarters. If the total is less than $30,000, you are a small supplier. If you exceed the $30,000 threshold in a single quarter, you are required to register for a GST/HST account with the Canada Revenue Agency within 29 days of the date your revenue exceeded the threshold. However, if your revenue over the last four quarters combined exceeds the $30,000 threshold, you are no longer considered a small supplier as of the end of the month following the quarter in which you exceeded the threshold.
To explain, imagine you sold $9,000 in taxable goods or services for each of the last three quarters. That brings your total to $27,000. During the fourth quarter of the year, you sell an additional $6,000 and pass the $30,000 threshold for being a small supplier. If that quarter ends in December, you must submit your GST/HST registration by the last day of January.
Small Suppliers and HST
If you are a small supplier, you may voluntarily register for a GST/HST account. If you decide to register for an account, you must assess GST/HST on the goods or services you sell to your clients, but you may also qualify for an input tax credit. Conversely, if you decide not to register for a GST/HST account, you don’t have to charge HST, but you also cannot qualify for the input tax credit.
Input Tax Credits
Input tax credits are exclusively reserved for taxpayers with GST/HST accounts. These credits reimburse
you for GST/HST you have paid on supplies or goods for your business. For instance, if you purchased a laptop for your business and paid HST on it, you could qualify for an input tax credit to cover the HST on the purchase. You may claim the input tax credit when you file your GST/HST return.