Effective July 1, 2010, Ontario harmonized its retail sales tax (RST) with the federal goods and services tax (GST) to form a harmonized sales tax (HST). However despite harmonization, some rules in Ontario’s Retail Sales Tax Act (RSTA) continue to have application today.
Bulk Sales - Agreements on or before March 29, 2011
Section 6 of the RSTA requires each person who disposes of “stock through a sale in bulk to which the Bulk Sales Act, Ontario applies” to obtain a Clearance Certificate from the Ministry of Finance before the disposition, where the sale is pursuant to a written agreement entered into on or before March 29, 2011. In most cases, the sale of all or part of a business will trigger the application of the Bulk Sales Act, Ontario.
The purpose of section 6 is to ensure that all RST collectable or payable by the seller is remitted to the government before the sale or closure of a business. To achieve this, section 6 requires the purchaser to obtain a copy of the Clearance Certificate from the seller. Failure to do so will cause the purchaser to be liable for any RST owing by the seller at the time of the sale.
If RST is owed by the seller, the Ministry of Finance may require funds to be held back from the proceeds of the sale prior to issuing the Clearance Certificate. Alternatively, the seller may be asked to agree in writing to a condition being placed on the Clearance Certificate.
Despite the foregoing requirements, the seller and the purchaser may agree to proceed with the sale without obtaining a Clearance Certificate from the Ministry of Finance. Doing so, however, puts the purchaser at risk of being liable for any RST owing by the seller as of the date of the sale and should be avoided if possible.
Taxable Insurance Premiums
Insurance premiums are exempt from GST and consequently, receive the same treatment under HST. However, since RST applied to premiums for certain types of insurance prior to harmonization, the Ontario government decided to continue applying RST at a rate of 8% to premiums on the same types of insurance (e.g. group insurance, benefit plans, insurance schemes/ compensation funds established under any Act of Canada or Ontario).
Insurance that was previously exempt from RST, such as automobile insurance premiums, continue to be exempt from RST after harmonization. Certain costs and fees, such as administration fees for benefit plans, are exempt from RST since they are taxed under HST.
Private Sales of Specified Vehicles
While HST now applies to purchases of specified vehicles (e.g. motor vehicle, off-road vehicles, motorized snow vehicles, aircrafts or vessels) from a GST/HST registrant, RST at a rate of 13% continues to apply to purchases of specified vehicles from a person who is not a GST/HST registrant, with some exceptions (e.g. transfers between family members, etc.).