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Q: I am in the process of starting a carpet cleaning business. Will I have to collect Provincial Sales Tax (PST)? If so, how frequently must I file?
A: New business owners should obtain information regarding their obligations to the taxing authorities. Federal and provincial governments provide handbooks and guides to assist businesses to understand their obligations to collect and remit the appropriate taxes. Most businesses will have a variety of taxes that require attention such as the Goods and Service Tax (GST), Provincial Sales Tax (PST), payroll taxes, federal corporate taxes and provincial corporate taxes. Although taxes are not generally income generators for the business, owners should not shirk their responsibility.
The general rate for Ontario’s PST is eight per cent. However, there’s a five-per-cent rate applies for accommodations such as hotels, a 10% rate on admission to places of amusement, such as theatres and Canada’s Wonderland, and a 12% rate for alcoholic beverages sold through retail stores.
A carpet cleaning business for PST purposes is considered a non-taxable service and therefore is not required to register nor collect PST from customers. A
According to Ontario’s The Basics Of Retail Sales Tax guide, PST applies to all tangible personal property, including anything that can be seen, weighed, measured, felt or touched, unless specifically exempt.
The following are the exceptions:
• Food products (not including candies, confections, snack foods and soft drinks).
• Prepared foods $4 or less sold at an eating establishment (two orders of two cups of coffee are cheaper than one order of four cups of coffee)
• Dry cleaning, carpet and upholstery cleaning.
• Car washing and engine shampooing.
• Goods solely used by disabled individuals.
• Books, newspapers, bulletins (The provincial government appears to have more respect for literacy than the federal government).
• Labour to install or repair real property of fixtures, such as contractors or plumbers.
• Children’s clothing (including diapers). Smaller folks can save a few dollars by shopping in the kid’s section.
• Footwear costing $30 or less.
• Feminine hygiene products.
• Drugs (medicinal kind) and medicine prescribed by a medical doctor.
• Hairstyling, barbering and beauty treatments.
• Veterinary care.
• Real property.
Small business owners — I recommend you leave tax issues to professional accountants and focus on the growth and expansion of the business.
Henry Choo Chong, CGA provides accounting and tax services to individuals and businesses in the GTA. He can be reached at 416-590-1728, ext. 304. Any questions to Money matters should be e-mailed to email@example.com.