Archive for the ‘Harmonized Sales Tax’ Category

Constellation 2010 Virtual Customer Conference

Tuesday, April 20th, 2010
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We have a great virtual customer conference planned for May 10-14th.  This is our largest virtual customer conference ever with over 30 sessions, guest speakers, industry experts, Constellation staff and many opportunities for builders to learn from their peers.

We’ll cover many recent enhancements in our home building software solutions and offer product training sessions as well.  For a detailed agenda and registration information, please click on the link below.

Register Now

The Facts about HST

Tuesday, August 25th, 2009
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With the HST announcement by the Ontario government in March the great unknown was how this would affect our clients?

I have attended the various seminars and workshops put on by the OHBA and BILD hoping to get definite answers to all my questions as to how the HST will be applicable to Homebuilders.  At these sessions there have had experts from both the private and public sectors.

I did get some information but all the rules have not been defined by Canada Revenue Agency or the Ontario Finance department.

Things You Should Know about HST – HST will be implemented on July 1, 2010

According to the Ontario Ministry of Finance the HST will be revenue neutral.  It will reduce the amount of tax paid by Ontario businesses.  That prior to the announcement there was a 2% o 3% RST (Retail Sales Tax) component already factored into the Home Sales price.

To take the Ontario New Housing Rebate the house must be the Primary residence.  The same rules and conditions as the GST rebate.  If the sale is “grand- parented” then there is no Ontario New Housing Rebate.  The Ontario New Housing Rebate can be claimed by the Home Buyer or can be assigned to the Builder.

For the HST rebate calculation the existing GST rebate remains unchanged.  For the Provincial portion of the HST the rebate will apply to the first $400,000 of the purchase price.

With the “Grand-parented” sale the Home Buyer does not pay the HST only GST.  But the Builder is able to claim the Input Tax Credits on all costs paid after July 1, 2010 related to the house construction.  The Builder will pay 2% of the selling price times a factor based on percentage of completion on July 1, 2010.

One of the changes with the HST implementation that the Builder must be aware of is Disclosure.  What I mean by this is that the Builder must disclose if the Agreement of Purchase and Sale was signed between July 19, 2009 and June 30, 2009, whether the 8% Provincial component of the HST applies and if the purchase price is net of the New Housing Rebate.  If this disclosure is not made then the Purchase Price is deemed to include the 8% Provincial component of the HST.

A builder is considered a large business (annual sales above $10 million) then the PST component for the Energy (i.e. Gas, Electrical), Telecommunications (excludes internet services), Vehicles and  Food, Beverage & Entertainment  will be restricted from applying for the Input Tax Credit on the PST portion only.

Ontario – New Harmonized Sales Tax

Friday, August 21st, 2009
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Have you ever asked a question and wish you had not?  That happened to me last week.  I asked one of our senior managers (a CA) “What do you know about GST/HST and the pending harmonization?”  His response — “It’s Complicated!”

Being an inquisitive type I started to do some research and — wow — was he right.  This new mandate for Ontario (and maybe some additional provinces) is going to have a significant and profound impact on our industry so I thought I would share some of what I have learned with you. 

First of all, it is a most interesting name – Harmonized Sales Tax – sounds pleasant… right?  Not exactly, based on what I could find out it brings harmony because in order to implement HST a builder is thrown into chaos bordering on pandemonium.  It is difficult to fathom how a builder, remodeler, or renovator can manage all of the requirements and continue to run their business.  For this reason, Constellation HomeBuilder Systems is making changes in our NEWSTAR Enterprise production and accounting system, to help the builder deal with the new tax rules and we’ll be ready when the rules come into effect.

Let’s cover a couple of the basics.  When? The new law goes into effect July 1, 2010, less than a year away.  Who is impacted?  All companies including builders, remodelers, and renovators are subject to the new regulations.  To further confuse you, some of the exemptions you had in the PST regulations no longer apply.  Not confused yet?  Well then, they will add some new exemptions for you to understand and keep track of.

You need to be planning for and understanding how you are going to comply with these new regulations.  One piece I read had some reassuring news… “The province acknowledges businesses will have to change their accounting systems”. 

With past regulatory changes Ontario builders have been able to rely on internal resources to address them.  This one is going to be a little tougher.  The transition rules for projects already under contract or under construction are likely to be more complex and require more information from your production system.  As an organization you can train your staff to learn the intimate details, or you can rely on your software partner to build these rules into their systems.  Constellation has a proven track record for doing this with Tarion requirements, GST calculations, payroll taxes, and other regulatory requirements in Canada and the United States.

HST is complex and I can show you how I came to this conclusion.  I “googled” HST and on the first page of search results I found some good information.  Here are a few of the links I found worthwhile.

http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/menu-eng.html
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/cnstrctn/menu-eng.html
http://www.canadabusiness.ca/gol/bsa/site.nsf/en/su07017.html#a1

The reason I say complex… The first link I gave you above has no less that 17 additional links to find more information.    Are you equipped to deal with this?  To make matters worse these taxes add to the purchase price of your houses and construction projects.  So how are you going to do this?

It is time to rely on your software partner.  Let them (us) do the heavy lifting and make the changes to your accounting and production system.  It is your software company that should be responsible for these changes.  Constellation has been very involved with the local home building associations and we will continue to be involved to ensure that our systems will include the functionality our customers need. We have already made the necessary changes for GST/PST and TARION and as a Canadian company we have a better understanding of these changes than any other software provider.  So if you are managing these statutory changes outside your core software, it is time to make a change.  If you are sitting on the fence delaying a software purchase now is the time to decide.

It is not all bad news.  There could be a small buying frenzy created because of the new taxes.  A buyer will see savings should they purchase and close before Canada Day next year.  Leverage that information and create a sense of urgency in your buyers.  Show buyers how delaying their purchase will cost them more money.  If you have inventory homes or lots waiting for new homes your sales team can take advantage of this knowledge.  Sell a few more homes and ease the transition.  Now that is what I call harmony!