Commodity Tax (GST/PST/HST)

Overview of HST Rules - Universities

The Nature of GST/HST:

• Harmonized Sales Tax (HST) is a consumption tax applicable to both goods and services.
• It is used on provinces where both the federal Goods and Service Tax (GST) and the Provincial Sales Tax (PST) have been combined into a single value added sales tax.
• The HST is currently implemented in 5 Provinces: New Brunswick (15%), Nova Scotia (15%), Newfoundland and Labrador (15%), Prince Edward Island (15%) and Ontario (13%).
• The HST rates differ above as each province sets its own PST rate within the HST.
• The HST rate in New Brunswick of 15% (PST – 10%; GST – 5%).
• Universities must consider their obligations under the GST legislation as both a vendor and a purchaser.

High level overview of how GST/HST applies to commercial, for-profit business. Businesses are required to:

• Collect and remit HST on taxable supplies (commercial activities).
• Track HST paid on purchases and expenses relating to commercial activities.
• File an HST return to recover HST paid on purchases and expenses by claiming an Input Tax Credit (ITC). The ITC is 100% of the HST paid (net cost = 0%).
• On the HST return, ITCs are subtracted from the total HST collected during the reporting period to determine the net tax to be remitted (or refunded).

Overview of how GST/HST applies to the University sector. Universities are required to:

• Collect and remit 100% of the 15% HST on taxable goods & services (i.e. commercial activity).
• Track HST paid on purchases and expenses related to commercial activities.
• File an HST return to recover HST paid on such purchases and expenses by claiming an ITC (net cost = 0%).
• Track HST paid on purchases and expenses related to non-commercial activities (normal university activities).
• File an HST return to recover a portion of the HST paid on such purchases and expenses by claiming and HST rebate.
• The rebate is 67% of the GST component only. Therefore the net tax cost on non-commercial activities is 11.65% (15% - (67% x 5%) = 11.65%).
• In practice, in areas of the University that carry on both commercial and non-commercial activities (i.e. WU Centre or AUC) a blended rebate rate percentage in calculated and applied to their activities.
• On the HST return, rebates are subtracted from the total HST collected during the reporting period to determine the University’s net tax to be remitted (or refunded).

Application of HST to University Purchases and Expenses

Non-Commercial Activities (Normal University Day to Day Operations)
PST + GST = HST
10% + 5% = 15%
Rebate (0%) + (3.35%) = (3.35)
Net Tax Cost 10% 1.65% 11.65%
Commercial Activities (Where Applicable)
PST + GST = HST
10% + 5% = 15%
ITC (10%) + (5%) = (15%)
Net Tax Cost 0% 0% 0%

For more in depth information or questions regarding tax, please contact the Taxation & Special Projects Analyst at 506-453-4833.