General Information
Almost everyone has to pay GST/HST on purchases of taxable supplies of goods and services. The HST will apply to all goods and services provided unless they are specifically exempted.
For purchases by Queen's, the place of supply will most often be Ontario. It is up to your supplier to charge the correct tax so you should not have to worry about it unless the supplier is unregistered to charge GST/HST (most foreign suppliers). In that case, self-assessment may be required. If you notice that the tax being charged is incorrect, you should request clarification from the supplier.
Queen's is a Public Service Body (PSB) and can claim PSB rebates for goods and services paid or payable in the course of carrying out activities in its capacity as a university. There are two (2) PSB rebates Queen's is eligible to claim:
- a percentage of the provincial part of the HST (new since implementation of HST), and
- a percentage of the federal part of the HST (no change with the implementation of HST)
Please refer to the section titled: What Rebates and Credits can Queen's Claim on Purchases? below for more information.
In addition to the PSB rebate, Queen's can claim input tax credits (ITCs) for both the federal and provincial components of the HST paid on property and services acquired in the course of commercial activities.
2.1 General Considerations
Queen's University engages in a variety of purchases. Some of these purchases are from other departments (internal) and some are from outside vendors (external).
There are rules governing which tax rates an outside vendor should be charging Queen's as well as rules on what information should be documented on invoices. Other topics include procurement card purchases, online purchases, account codes to use for taxes, insurance and tax, travel expense reimbursement and Canadian Customs.
Some of your purchases may actually be from other Queen’s departments. For example, the Athletic Centre may purchase products from the Campus Computer Store. These “purchases” are actually internal transfers and GST/HST does not apply and should not be charged on these internal transactions.
However, please note that Queen’s has many affiliated organizations who are considered external customers for tax purposes. These are organizations who have a connection with Queen’s and typically use Queen’s ChartFields, specifically funds starting with “9”. Funds starting with “9” are called agency funds and organizations using these “9” series funds should apply HST.
a) Domestic Suppliers
In most cases, you do not need to concern yourself with the taxes that are charged by a Canadian vendor.
In Canada, it is the vendor's responsibility to charge taxes correctly. Although the CRA has been known to assess the purchaser in rare instances, their normal policy is to assess the vendor for failure to charge tax. The vendor then has the ability to recover the taxes (but not interest or penalties) from the purchaser.
That being said, if you notice something unusual about the taxes that appear on an invoice, it is prudent to seek clarification from the vendor. Unless the supply is exempt or zero-rated, vendors should be charging Queen's 13% HST in almost all cases. Queen's does make many exempt purchases however, so it is perfectly normal to see domestic invoices with no tax.
Suppliers in Canada must register to charge and collect GST/HST as long as they are not small suppliers. Queen's does not deal with many small suppliers (the threshold for the CRA to consider someone to be a small supplier is only $30K in annual sales or $50K in annual sales for PSBs). If a supplier is registered for GST, they are automatically registered for HST. For example, as per the place of supply rules, if a vendor in Alberta ships goods to Queen's, they must still charge 13% HST even though Alberta only has GST.
b) Foreign Suppliers
A foreign supplier that is registered for GST/HST should be treated like a domestic supplier. With the exception of some large corporations in the USA that frequently do business in Canada, most foreign suppliers are not registered. If you are unsure as to whether a supplier is registered, it is prudent to ask them.
An unregistered foreign supplier will not charge GST/HST. It is Queen's responsibility to self-assess the tax. Please refer to the section on Self-Assessment for more information.
In order to ensure that rebates and ITCs (input tax credits) are calculated correctly, HST paid should be recorded to the same fund and department as the expense associated with the HST paid. Each department in PeopleSoft has been assigned a rebate recovery rate (from 73.77% to 100%). The system will calculate the applicable HST rebate recovery amount based on the department recovery rate.
For vouchers and cheque requisitions entered by Accounts Payable, PeopleSoft is configured to default to apply the Public Service Body (PSB) rebate if the vendor is set up to collect tax. The system automatically creates the accounting entry. Accounts Payable can manually adjust the VAT (Value Added Tax) code for travel expenses that have occurred in other provinces and for books eligible for the federal book rebate. In this way, the system will calculate the correct tax given various situations as long as the correct codes are selected by Accounts Payable.
Queen's is a Public Service Body (PSB) and can claim PSB rebates for goods and services paid or payable in the course of carrying out activities in its capacity as a university.
PSB Rebates
| % rebate of the Federal Part of HST (5%) | % rebate of the Provincial Part of the HST (8% in Ontario) | |
|---|---|---|
| A municipality | 100% | 78% |
| A university or public college | 67% | 78% |
| A school authority | 68% | 93% |
| A hospital authority, facility operator or external supplier | 83% | 87% |
| A charity or qualifying non-profit organization | 50% | 82% |
For the purposes of calculating the rebate on the total HST paid, the blended PSB rebate recovery rate for Queen's (based on the above) is 73.77%.
If all revenue in a department is taxable, the PSB rebate does not apply on the department expenses, instead, the department is eligible for an input tax credit at 100% of the total HST paid. In general, non-credit programs are taxable, and commercial operations are taxable.
Rebates and ITCs are automatically applied against the expenses (which means that the department pays less). The associated rebate goes to a rebate account where it is then zeroed out when Queen's receives its rebate from the government. In order to receive this rebate, and as part of regulatory requirements, Queen's files an HST return to CRA on a monthly basis.
In order to fulfill its tax obligations, Queen's uses a number of accounts to keep track of GST/HST.
The following accounts are commonly used for purchases (with the exception of account 210080 which is used for sales and HST self-assessed on purchases):
| Account | Account Name | Description |
|---|---|---|
| 120080 | AR-HST Recv Normal Rebate | For Rebates and ITCs on purchases taxable at 13% [see section 2.2.3 and section 2.2.6 on rebates and ITCs] |
| 120082 | AR-HST Recv 100% Book Rebate | For the 100% federal book rebate [see section 2.7 on book rebates] |
| 210080 | AP-HST Payable Collected | HST Collected on sales, HST self-assessed on purchases (including foreign sales) |
| Accounts less commonly used/specific department use | ||
| 120085 | GST Rebate - Manitoba | For Rebates and ITCs of 5% GST for purchases in Manitoba |
| 120086 | GST Rebate - PEI | For Rebates and ITCs of 14% HST for purchases in PEI |
| 120087 | GST Rebate - Quebec | For Rebates and ITCs of 5% GST for purchases in Quebec |
| 120088 | GST Rebate - Saskatchewan | For Rebates and ITCs of 5% GST for purchases in Saskatchewan |
| 120089 | GST Rebate - Alberta | For Rebates and ITCs of 5% GST for purchases in Alberta |
| 120090 | GST Rebate - North West Terr. | For Rebates and ITCs of 5% GST for purchases in North West Territories |
| 120091 | GST Rebate - Yukon | For Rebates and ITCs of 5% GST for purchases in Yukon |
| 120092 | GST Rebate - Nunavut | For Rebates and ITCs of 5% GST for purchases in Nunavut |
| 120093 | GST Rebate - British Columbia | For Rebates and ITCs of 5% GST for purchases in British Columbia |
| 120094 | GST Rebate - New Brunswick | For Rebates and ITCs of 13% GST for purchases in New Brunswick |
| 120095 | HST Rebate - Nova Scotia | For Rebates and ITCs of 15% GST for purchases in Nova Scotia |
| 120096 | HST Rebate - Newfoundland | For Rebates and ITCs of 13% GST for purchases in Newfoundland |
In order to claim rebates or input tax credits, Queen's is required to keep complete and accurate records of its purchases. In general, these records must be detailed enough to prove that the tax was paid. For GST/HST purposes, the CRA can assess up to four (4) years after a rebate is claimed. Queen's has four (4) years to claim rebates, so the CRA could theoretically assess up to eight (8) years after the invoice date. With capital property (and especially real property), documents may need to be kept indefinitely.
The CRA is very serious about documentary requirements. In the event of an audit, CRA may deny ITCs and rebates and/or assess interest and penalties if documentary requirements are not met.
Part of your responsibility when claiming rebates and ITCs is to ensure that the vendor is actually registered for GST/HST. The CRA has a website where you can confirm that the number the vendor gives you is accurate.
Here is some information from the CRA on documentary requirements for ITCs. Although documentary requirements for rebates are not stipulated by regulation, it is prudent to follow these rules for rebates as well. The Appendix provides a good summary and it has been reproduced below:
| Total Amount Paid or Payable Is: | |||
| GST/HST prescribed information under the Input Tax Credit Information (GST/HST) Regulations | Less than $30 | Greater than $30 & less than $150 | $150 or more |
| Supplier or intermediary's name, or the name under which is does business (i.e.: trading name) | X | X | X |
| Date of invoice or, where no invoice is issued, the date tax is paid or payable | X | X | X |
| Total amount paid or payable for all supplies | X | X | X |
|
Supplier or Intermediary's GST/HST registration number where the amount paid/payable for the supply/supplies does not include the amount of GST/HST. i) The amount of tax paid/payable in respect of each supply or all the supplies, OR a) The total of the GST/HST and PST paid/payable in respect of each taxable supply, and a statement to the effect that the total in respect of each taxable supply includes the GST/HST and PST paid/payable, OR Where the amount paid/payable for the supply/supplies includes GST/HST and one or more supplies are taxable supplies that are not zero-rated supplies, a statement to the effect that GST/HST is included in the amount paid/payable for each taxable supply, the total tax rate and the amount paid/payable for each supply or the total amount paid/payable for all such supplies to which the same total tax rate applies. |
X | X | |
| Indication of the status of each supply where the invoice includes both taxable and exempt supplies | X | X | |
| Recipient's name or trading name, or the name of the recipient's agent or duly authorized representative | X | ||
| Terms of payment | X | ||
| Brief description of each property or services sufficient to identify it | X | ||
Procurement cards (P-Cards) are credit cards used by departments for purchases of supplies and other items. Each P-Card, when issued to a user, is associated with the user's department and all purchases will be charged to that particular department. On a monthly basis, Scotiabank will send to Strategic Procurement Services a summary of the total charges processed for the month, which is loaded into PeopleSoft. Each P-Card user is responsible to reconcile his/her purchases for the month and the reconciliation must be approved by the user's supervisor.
The Scotiabank system will calculate the HST on the purchase from the total amount of the transaction. However, the P-Card user must verify the amount of tax shown on the invoice and if necessary manually adjust the sales tax on the Scotiabank website to match the actual tax paid on the invoice. The applicable rebate recovery will be based on the recovery rate attached to the department in which the expense is posted. P-Card purchases are eligible for rebates and input tax credits just like any other purchase.
The self-assessment rules apply to P-Card purchases. To self-assess means to calculate how much tax should be paid on the purchase of a good or service, and then to remit the tax. It is often required on foreign purchases. If a P-Card purchase needs to be self-assessed, a journal entry will need to be booked to properly record the self-assessment.
If, after a P-Card purchase has been processed with the 73.77% PSB rebate and it is determined that Queen's is eligible for 100% ITC, then a journal entry will need to be booked to reverse the 73.77% rebate and replace it with the 100% ITC.
HST applies to purchases made online in the same way that it does to any other purchase. Online purchasing present challenges in that online-only vendors may not be as tax compliant as traditional brick and mortar retailers. Additionally, it may not be as easy to determine the location and tax registration status of an online vendor. Self-assessment rules apply to online purchases.
As an example, please consider the popular online retailers Amazon and Ebay.
Amazon (amazon.ca) is registered for GST/HST purposes and will collect HST from Canadian purchasers. However, Amazon also acts as a platform for 3rd parties to sell goods, and purchases could be from one of these 3rd parties. Although Amazon does have services in place to facilitate tax collection for vendors that use them, not all vendors make use of the services. To make matters even more complicated, many of these vendors are small suppliers who are not required to register. It is important to pay particular attention to the taxes that you are charged, and the supplier that you are actually buying from (their location, and tax registration status).
Ebay (ebay.ca) is similar except that it does not make any sales itself. All sales are from 3rd party vendors who use the website as a platform for their businesses. Again, it is important to pay particular attention to the taxes that you are charged, and the supplier that you are actually buying from (their location, and tax registration status).
Most insurance in Ontario is subject to 8% Retail Sales Tax (RST). Insurance is the only purchase that is still subject to RST. GST/HST does not apply to insurance, only the 8% RST applies.
It is extremely important to remember that this tax is NOT provincial HST even though the rate is the same. As a result, Queen’s cannot claim rebates or input tax credits of any kind on this tax. If you are keying in an insurance invoice, treat the tax as part of the subtotal rather than as HST. That way, the system will not incorrectly calculate rebates.
If you’re unsure as to whether the tax on an insurance payment is RST, you should ask the vendor. You could also calculate the rate that the vendor is charging tax (tax / subtotal). If the rate is 8%, it is probably RST.
Sometimes an invoice or receipt will not specifically show the tax. In most instances, the vendor will include a note somewhere on the invoice to indicate that taxes are "included" in the total. The vendor should also have its GST/HST registration number listed on the invoice and ideally the rate of tax that is being charged and on what supplies the tax applies if some supplies are exempt or zero-rated (please refer to the tab below on Single vs Multiple Supplies with Different Tax Rates). In practice, this does not always happen - especially for low dollar value purchases.
Tax included invoicing is most common for hotels, admission tickets (to events, conferences, museums, and so on), airline tickets, parking, and taxi fares, but other vendors may also use this method.
If taxes are included, Queen's is still eligible to claim rebates and input tax credits. In order to ensure that Queen's gets these rebates and ITCs, it is important to pay careful attention to the taxes that the vendor is charging and enter those taxes correctly in PeopleSoft.
If an invoice includes both taxable and exempt or zero-rated purchases, the supplier should indicate the dollar value of the tax and/or which items are taxable (and, ideally, the rate of tax that applies to those items).
It is common for suppliers to include items taxed at 13%, 5%, and 0% on the same invoice. For example, if the library were to purchase an e-book and a printed book from the same vendor, that vendor might invoice for the two purchases together. The e-book would be subject to 13% HST, while the printed book would only be subject to 5% GST/HST.
In some instances, two or more elements may form part of a single supply or one supply may be incidental to another. In those instances, the vendor may apply a single tax treatment to the entire invoice.
As always, it is important to ensure that taxes are entered correctly in PeopleSoft so that Queen's can recover the rebates and input tax credits it is eligible to claim.
The Expense Reimbursement System (ERS) is set up to automatically calculate GST/HST on Canadian purchases based on the province or territory of purchase. The tax rebates and credits that Queen’s University is eligible for will be automatically booked to the appropriate ChartFields.
The Canada Border Services Agency ("CBSA") requires that the 5% federal portion of HST be assessed and paid on goods that physically cross the Canadian border. They will not assess tax on services or intangibles (such as software that you download from a website). Queen's uses the brokerage services of Thompson Ahearn & Co. Ltd. who pay import taxes, duty, & fees on behalf of Queen's and who invoices Queen's once a month for those fees in addition to their own service fee for clearing the goods into Canada. At this time, the brokerage services only charges GST on cross border orders, the PST still needs to be self-assessed.
Invoices from the customs broker (Thompson Ahearn) will typically include the 5% HST assessed on the goods and any other related duty & fees, as well as the brokerage service charge. Tax is only charged on the brokerage service charge and Queen's is still responsible for self-assessing the remaining 8% provincial portion of HST on the goods. Queen's can claim a PSB rebate of 67% on the federal portion of HST that is charged by customs (or a claim a Federal Rebate of 100% on the federal portion of HST if the item is a qualifying book - please refer to the section on Book Rebates). Additionally, Queen's can claim its PSB (Public Service Body) rebates on the 13% HST that Thompson Ahearn charges for its services. If a good is eligible for an input tax credit, Queen's can claim ITCs first and then the PSB rebates on any tax remaining after ITCs have been applied.
Please refer to Strategic Procurement's website for more information.
If you have any questions or concerns, please contact us
2.2 Exemptions and Rebates
The same exemptions and rebates apply to purchases as with sales where the GST/HST is not applicable in part or in full. For example, If Queen's purchases printed books for the book store, there will be a book point of sale rebate applied on the invoice and Queen's will not have to pay the 8% provincial component of the HST. Only the 5% federal component of the HST should be charged on the invoice for the purchase of the printed books.
The supplier will not charge any GST or HST and Queen's will not pay GST or HST on exempt purchases of goods and services.
Most exemptions are for services though certain real property may also be exempt. The most common exemptions that you might encounter at Queen's are for health care services and educational services.
Below is a listing of a few exempt supplies that pertain to Queen's. However, there is extensive list of exemptions on the Canada Revenue Agency.
| List of a Few Exemptions - no GST/HST Paid |
|---|
| Courses that lead to a certificate or diploma to practice a trade or vocation. |
| Tutoring for an individual who takes a course approved for credit. |
| Music lessons. |
| Child care services (day care - less than 24 hours a day) for children 14 years old and younger. |
| Legal Aid services. |
| Most health, medical, and dental services performed by licensed physicians or dentists for medical reasons. |
| Long-term residential accommodation (of one month or more), condo fees. |
The supplier will charge HST at a rate of 0% and Queen's will not pay any HST on all zero-rated purchases.
For Queen's as the purchaser, purchases that are zero-rated are effectively the same as being exempt. The difference is that the supplier can claim input tax credits on its own expenses related to the sale.
Most zero-rated supplies are goods. The most common zero-rated goods you might encounter at Queen's are prescription drugs, medical devices, basic food products, and goods for export. International travel may also be zero-rated. The CRA has more information on Zero-rated supplies of goods and services.
| List of Zero-Rated Supplies - GST/HST taxable at 0% |
|---|
|
Basic groceries - milk, bread and vegetables |
| Agricultural products - grain, raw wool, and dried tobacco leaves |
| Most farm livestock |
| Most fishery products - fish for human consumption |
| Prescription drugs and drug-dispensing fees |
| Medical devices - hearing aids, artificial teeth |
| Exports |
| Many transportation services - origin or destination is outside Canada |
In addition to the Point of Sale Rebates, Queen's, as a Public Service Body (PSB) can claim PSB rebates for goods and services paid or payable in the course of carrying out activities in its capacity as a university.
PSB Rebates
| % rebate of the Federal Part of the HST (5%) | % rebate of the Provincial Part of the HST (8% in Ontario) | |
|---|---|---|
| A municipality | 100% | 78% |
| A university or public college | 67% | 78% |
| A school authority | 68% | 93% |
| A hospital authority, facility operator or external supplier | 83% | 87% |
| A charity or qualifying non-profit organization | 50% | 82% |
For the purposes of calculating the rebate on the total HST paid, the blended PSB rebate recovery rate for Queen's (based on the above) is 73.77%.
If all revenue in a department is taxable (i.e. Parking Department), the PSB rebate does not apply on the department expenses. Instead, the department is eligible for an input tax credit (ITC) at 100% of the total HST paid. In general, non-credit programs are taxable, and commercial operations are taxable.
Rebates and ITCs are automatically applied against the expenses (which means that the department pays less). The associated rebate goes to a rebate account where it is then zeroed out when Queen's receives its rebate from the government. In order to receive this rebate, and as part of regulatory requirements, Queen's must file an HST return to CRA on a monthly basis.
The below table shows how the PSB rebate is calculated:
| Example of a PSB Rebate Calculation: | |||
|---|---|---|---|
| Purchase Amount Before Taxes | $100.00 | ||
| HST (13%) | |||
| Federal Component @ 5% HST | $5.00 | ||
| Provincial Component @ 8% HST | 8.00 | ||
| Total Tax Amount | 13.00 | ||
| Total Amount after Taxes | $113.00 | ||
| PSB Rebate | |||
| Federal Rebate @ 67% | (3.35) | ||
| Provincial Rebate @ 78% | (6.24) | ||
| Total Blended PSB Rebate | (9.59) | Use account 120080 | |
| Cost to Department | $103.41 | Use dept. exp. account | |
HST paid should be recorded to the same fund and department as the expense associated with the HST paid.
The below table shows the difference between a PSB rebate and an ITC:
| Department with PSB Rebate of 73.77% | Department with ITC of 100% | |
|---|---|---|
| Purchase Amount Before Taxes HST (13%) | $100.00 13.00 |
$100.00 13.00 |
| Total after Tax Amount | $113.00 | $113.00 |
| Blended PSB Rebate/ITC | (9.59) | (13.00) |
| Cost to Department | $103.41 | $100.00 |
Vouchers and cheque requisitions entered by Accounts Payable are automatically defaulted to record the HST paid to the appropriate fund and department.
Each department in PeopleSoft has been assigned a rebate recovery rate (from 73.77% to 100%). The system will automatically calculate the applicable HST rebate recovery amount based on the department recovery rate and apply them against your expenses. Qualifying books are eligible for a 100% rebate. PeopleSoft will automatically calculate book rebates based on the account.
If an expense is eligible for input tax credits, Public Service Body (PSB) rebates should only be claimed on any tax remaining after ITCs have been applied.
For example, if a service that Queen's purchases is used 40% commercially, it is eligible for a 40% ITC. Queen's should claim 40% of the tax as an ITC and then apply the PSB rebate to the remaining 60% of the tax. If the same service were eligible for 100% ITC, there would be no tax remaining on which to claim a PSB rebate.
Some expenses are not eligible for the PSB rebate, but many of these are not applicable to Queen's. The CRA lists:
| Expenses NOT Eligible for PSB Rebate |
|---|
| Memberships in a dining, recreational, or sporting club. |
| Tobacco products and alcoholic beverages you supply and for which you are not required to collect the GST/HST (except when the alcohol or tobacco is included in the price of a meal). |
| Property and services you acquire to provide long-term residential accommodation (one month or more), unless more than 10% of the accommodation is restricted to seniors, youths, students, or individuals with a disability or with limited financial resources who qualify for occupancy or reduced rents under a means or income test. |
| Property and services you acquire primarily (more than 50%) for the supply of a parking space made available to residential tenants unless more than 10% of the residential accommodation associated with the parking space is restricted to seniors, youths, students, or individuals with a disability or limited financial resources who qualify for occupancy or reduced rents under a means or income test. |
| Property and services acquired primarily for making supply of real property to another person for use by that person in leasing residential property on an exempt basis (including incidental parking), unless that other person is a PSB and more than 10% of the residential property is restricted to seniors, youths, students, individuals with a disability, or individuals with limited financial resources who qualify for occupancy or reduced rents under a means or income test. |
| Property or services you supply to another person, if the property or services is a taxable benefit to that person for income tax purposes, but you do not have to remit any GST/HST on the supply. |
| Property and services considered to be acquired by you acting as the operator of a joint venture (where an election has been filed) if any of the co-venturers would not be entitled to claim a public services bodies' rebate if they were acquired by the co-venturer. |
| Property and services you acquire to supply to an officer, employee, or member, or to another person related to that person, for personal use unless: - you supply it for its fair market value in the same year you acquire it and tax is payable in respect of the supply; or - you supply the good or services free of charge to the person and it is not a taxable benefit. |
Please refer to the CRA guide on PSB rebates for more information.
The supplier will charge GST/HST at a rate of 5% for purchases that are eligible for a Point of Sale Rebate.
Most point of sale rebates apply to goods. The most common ones you might encounter at Queen's are for qualifying books, newspapers, and meals under $4. Please refer to The Ontario Ministry of Finance for more information.
Qualifying Items for the Point-Of-Sale rebate and in which province it applies:
| Province | Books | Children's Items | Feminine Hygiene Products | Qualifying Heating Oil | Newspaper | Qualifying Food & Beverage |
|---|---|---|---|---|---|---|
| New Brunswick | Yes | No | No | No | No | No |
| Newfoundland and Labrador | Yes | No | No | No | No | No |
| Nova Scotia | Yes | Yes | Yes | No | No | No |
| Ontario | Yes | Yes | Yes | No | Yes | Yes |
| Prince Edward Island (PEI) | Yes | Yes1 | No | Yes | No | No |
Note 1: For PEI, Children's items do not include children's diapers.
Please refer to Canada Revenue Agency for more information on Point of Sale Rebates.
In addition to the Point of Sale Rebates discussed earlier, Queen's is eligible for a federal book rebate equal to 100% of the federal component of the HST (5%) on qualifying books.
As with all goods qualifying for the point of sale rebate, Queen's should only be billed the federal portion of the HST (5%) for purchases of qualifying books. Queen's can then claim the federal book rebate equal to 100% of the federal portion of the HST (5%).
However, in order for the Point of Sale Rebate and the Federal Book Rebate to apply, the book must satisfy the criteria of a "qualifying book".
| Qualifying Books are Defined to be: |
|---|
| A printed book or an update of a printed book |
| An audio recording 90% or more of which is a spoken reading of a printed book |
| A bound or unbound printed version of scripture of any religion |
| A printed book with a read-only medium that is wrapped, packaged or prepared for sale as a single product where the read-only medium contain 90% or more of the value of which is reasonably attributable to a reproduction of a printed book and/or material that makes specific reference to the printed book and its content, and that supplements and it's integrated with that content |
| A printed book with a read-only medium or a right to access a website (or both) that is wrapped, packaged or prepared for sale as a single product specially designed for use by students enrolled in a qualifying course where the read-only medium or website contains material related to the subject matter of the printed book1 |
As a result, "books" that are in electronic format, e.g., a CD, will not be considered as a qualifying book for GST/HST rebate purposes and will be not be eligible for the available rebates. Please note that the rebates for books apply to ALL books, and not just those purchased by the library.
Find out what qualifies as a book for purposes of the rebate from the CRA website.
When a company makes a taxable sale, it can recover the HST it paid on its own expenses as an input tax credit. Input tax credits (ITCs) are intended to prevent embedded tax and double taxation. Only the final consumer should be burdened with the tax. Although ITCs are more common for commercial businesses (many businesses claim ITCs on all of their expenses), Queen's is also eligible to claim them in instances where a department makes taxable sales. Zero-rated sales count as taxable sales because tax is charged at 0%.
ITCs should be claimed when the tax is paid or payable, but they can be claimed in any reporting period up to 2 years after the end of the University's fiscal year when the tax first became paid or payable (whichever comes first).
The CRA has information about ITCs on their website. The following link is for non-profit organizations, but the rules are nearly the same for Queen's. Queen's is not using a special net tax calculation method or the simplified method, so you can ignore sections that refer to these.
The operations of the Departments in the list below are deemed to be commercial in nature and are therefore setup in PeopleSoft to have 100% ITC. This means that these departments will receive a refund on all the taxes paid once the monthly HST return filed by Queen's has been processed by CRA.
Departments Deemed Commercial in Nature:
| Department | Department Description | Faculty |
|---|---|---|
| 12200 | QEDC General Admin | School of Business |
| 12201 | QEDC Custom Admin | School of Business |
| 12202 | QEDC UAE Admin | School of Business |
| 12203 | QEDC Custom Admin | School of Business |
| 12210 | Open Enrollment Programs | School of Business |
| 12211 | Custom Programs | School of Business |
| 12212 | QEDC Other | School of Business |
| 12405 | Executive Decision Centre | School of Business |
| 12406 | Queen's Business Consulting | School of Business |
| 17201 | Industrial Relations Centre | Industrial Relations |
| 42603 | Canada Post Franchise | JDUC |
| 44801 | Queen's/KGH Parking Commission | Parking |
| 44802 | Parking-Operations | Parking |
a) Non Capital Expenses
For general operating expenses, you can recover ITCs to the extent that you use the expense in making a taxable supply. For example, if you hired a consultant who bills hourly to help with your courses and the consultant spent 75% of his time on exempt courses and 25% on taxable courses, it would be reasonable to claim 25% of the tax he charged you as an ITC. If a supply is used 90% or more in taxable activities (referred to as commercial activities), you can claim an ITC on the full amount of tax. If it is used 10% or less in commercial activities, you cannot claim an ITC.
b) Capital Expenses
Different rules apply to capital personal property (furniture, equipment, and so on). If you use the property more than 50% in commercial activities, you can claim a full ITC. If the property is used 50% or less in commercial activities, you cannot claim an ITC. If you change the use from primarily commercial to primarily exempt you have to pay back ITCs that were claimed based on the current fair market value of the property and vice versa.
Due to special rules that are in place for Universities, capital real property (buildings and land) is treated in much the same way as capital personal property unless the University files an election. This election can only apply to real property (not capital personal property).
If you have any questions or concerns, please contact us.
2.3 Self-Assessment
When goods and services are delivered to Queen's from within Canada, the applicable taxes should be properly documented and charged on the bill/invoice to Queen's. If the goods and services are delivered from outside of Canada, Queen's will likely have to self-assess the tax.
This section explains how and when the self-assessment rules apply.
Taxable goods and services delivered and/or performed in Ontario should be charged HST unless the goods and services qualify for exemptions, point of sale rebates, or are zero-rated supplies.
It is the responsibility of the individual initiating the purchase to indicate to Accounts Payable that HST needs to be self-assessed. They need to use the check box on the cheque requisition form to indicate self-assessment is required. The self-assessment rules apply to all purchases by Queen's, including those made on P-Cards.
Despite the general rules discussed below, self-assessment on purchases made within Canada should almost never be required by Queen's. Self-assessment will most often be required on foreign purchases (goods and services delivered from outside of Canada).
To self-assess means to calculate how much HST should be paid on the purchase of a good or service when no tax has been billed on an invoice by the supplier. That HST is then remitted by Queen's to the CRA. A portion of the amount self-assessed (the amount not eligible for a PSB rebate or other credit) will be charged to the same expense account where the cost of the goods or services are being charged.
a) General Rules
Under the current place of supply rules, Queen's is required to self-assess tax on any supply of property or service made outside a participating province for use in a participating province. Queen's may then claim rebates on tax paid according to the rebate rules for Public Service Bodies (PSBs): 67% of the federal HST, 78% of the provincial HST, federal book rebate or 100% of the federal HST on printed books and/or input tax credits (ITC's). A participating province is a province that charges HST.
Suppliers in non-participating provinces are required to charge HST if the place of supply is in a participating province. If a supplier instead charges GST only or GST and another province's tax, the supplier should be notified so that the invoice can be changed. Ultimately, the responsibility falls on the supplier to charge the taxes correctly. In some cases, the place of supply may actually be in another province (many travel expenses for example), in which case the supplier will correctly charge a different type of tax. Queen's cannot claim a Public Service Body (PSB) rebate on taxes that are not GST or HST. For example, Queen's cannot claim a PSB rebate on the PST (5%) from Saskatchewan because Saskatchewan PST is not provincial HST nor is it federal HST.
In practice, self-assessment on supplies purchased within Canada will be extremely rare. Queen's has only one location (in Ontario), so suppliers should charge Queen's 13% HST in nearly all situations. Self-assessment will most often be required on purchases from unregistered international suppliers - such as those from the USA. GST/HST registered international suppliers are treated in the same way as domestic suppliers for GST/HST purposes. Some larger corporations in the USA are registered, so this is something to keep in mind. If you do not know if a supplier is registered to collect GST/HST, it is prudent to ask them.
Queen's can claim rebates on self-assessed tax, and tax charged by registered foreign suppliers in the same way that it would claim rebates on tax charged by domestic suppliers.
For further information on self-assessment, please refer to the CRA's technical bulletin.
b) Exceptions
Queen's is not required to self-assess HST on:
- Goods or services that are normally tax-exempt or zero-rated. Keep in mind that, although many services are exempt, it is rare for goods to be exempt. Goods are more likely to instead be zero-rated or eligible for a point of sale rebate.
- Goods or services that are not consumed in a participating province (reimbursement of some travel expenses for example).
- Goods that are for commercial resale (a full input tax credit is available)
- Printed books (printed books are exempt from the provincial HST and a 100% rebate on the federal HST is also available for Queen's). Additionally, there is no requirement to self-assess the provincial portion of the HST on other goods that are eligible for the point of sale rebate.
c) If you purchase Tangible Property (View drop down below for more information)
Most common case: Self-assess the provincial portion of HST at 8%, Queen's receives a 78% rebate on the 8%.
d) If you purchase Intangible Property (View drop down below for more information)
Most Common Case: Self-assess HST at 13%, Queen's claims a combined PSB rebate of 73.77%
Tangible personal property in this case refers to items that are physically shipped across the border.
Common examples include:
1) Lab Equipment
2) Books
3) Computers
How to Self-Assess the HST on a Tangible Property
Typically, such items are assessed 5% tax by the customs broker. If HST is not charged by the vendor (the most common case for foreign suppliers), Queen's is required to self-assess the HST at the same rate an Ontario vendor would have charged it. If the customs broker has already assessed 5% federal component of HST, Queen's must self-assess the 8% provincial component of the HST.
Examples
Example 1 : Queen's purchases a piece of lab equipment from a supplier in the United States for $1,000.00. The supplier does not charge HST. The item is shipped across the border and the customs broker charges Queen's the 5% federal component of the HST at $50.00. Queen's is then required to self-assess the other 8% at $80.00.
Example 2 : Queen's purchases furniture from a supplier in the United States for $1,000.00 and $130.00 HST. Since the supplier charged the full HST, there is no requirement for self-assessment.
Example 3 : Queen's purchases software from a supplier in the United States for $100.00 and the software is shipped to Queen's in the form of a CD-ROM. The supplier charges the 5% federal component of the HST only at $5.00. Queen's should contact the vendor since it is likely that the supplier should have charged 13% HST based on Queen's location in Ontario.
Example 4 : Queen's purchases a book (assume it is a qualifying book) from a supplier in Germany for use in the library. The supplier charges 5% federal HST. In this case Queen's would not have to self-assess the 8% provincial HST since qualifying printed books are eligible for a point of sale rebate on the provincial component of the HST. Queen's is also eligible for a 100% book rebate on the federal component of the HST instead of the usual 67% PSB rebate on the federal portion of the HST (provided that the books are not for resale).
| Example of a Self-Assessment on Tangible Goods: | ||
|---|---|---|
| Out of Province | Out of Country** | |
| Computer Hardware Purchase Federal Component of HST (5%) |
100.00 5.00 |
100.00 - |
| Invoice Total | 105.00 | 100.00 |
| Self-Assess Provincial Component of HST (8% for Ontario) Self-Assess HST (13%) |
8.00 | - 13.00 |
| PSB Blended Rebate (73.33%) | (9.59) | (9.59) |
| Net Charge to Cost Centre | 103.41 | 103.41 |
| **Out of Country Vendor is not registered for HST in this example | ||
Intangible personal property typically refers to the supply of electronic goods or rights to access content. If the intangible property can be used in a participating province, self-assessment is required. Common examples include:
1) Electronic subscriptions (library databases, site access)
2) License agreements (software, intellectual property)
How to Self-Assess the HST on Intangible Property
Intangible supplies do not go through customs. Unless the vendor charges the HST, no tax will be charged. Queen's is required to self-assess the full HST on any taxable intangible supplies that are consumed in a participating province.
Example: Queen's purchases the right to access an electronic database of research journals from a supplier in the United States for $10,000.00. The supplier does not charge tax and the item is not shipped so our broker does not assess any tax. The database is for use primarily (>50%) in Ontario so Queen's must self-assess the full 13% HST at $1,300.00.
e) If you purchase a Service
Most Common Case : Self-assess HST at 13%, Queen's claims a combined PSB rebate of 73.77%
For services that relate to a location specific event or tangible goods:
Queen's is required to self-assess the HST if the service is performed in relation to tangible property that is located in a participating province or a location specific event that takes place in a participating province.
For services that are not in relation to tangible personal property or a location specific event:
Queen's is required to self-assess the HST if the service takes place in a participating province OR the service provider obtains a billing address in a participating province.
Examples
Example 1: A contractor from the UK is hired to inspect a piece of equipment that is located in the UK. The service takes place entirely in the UK so no HST is due.
Example 2: A consultant from the United States is hired to assist in the completion of a report that is to be used in Ontario. He does not charge HST. Since the supply is to be used in Ontario, Queen's must self-assess the HST at 13%.
Example 3: A consultant bills Queen's for advice he gave over the phone while he was in the United States. He does not charge any HST. Since the consultant billed Queen's at its address in Ontario, the place of supply is Ontario and Queen's must self-assess HST at 13%.