MILLAR KREKLEWETZ LLP is a boutique Canadian law firm with lawyers who have significant expertise in assisting businesses with commodity tax issues, including the GST/HST, PST, customs duties, other excise tax and duties, and other consumption based taxes.

The following is a short introduction to our services relating to commodity tax.

Commodity Tax

Commodity Tax  – General

The term “commodity tax” as it generally applies in Canada refers to consumption based taxes, such as the goods and services tax and the harmonized sales tax (the “GST” and “HST”, respectively), provincial sales taxes (“PST”), customs duties, and other excise tax and duties.  

GST

The GST is Canada 's multi-level, value-added taxing system which has been in effect since January 1, 1991.  It is imposed under Part IX of Canada's Excise Tax Act (the “ETA”), and is administered by the Canada Revenue Agency (the “CRA”).

The 7% GST is imposed on a comprehensive range of transactions involving goods, services and intangibles – called “supplies” – unless these supplies are “exempt” or “zero-rated” under Schedules V and VI of the ETA.  Unlike other sales taxes, which only levy tax on the consumer or user of the goods/services, the GST is levied on every transaction in the production and distribution chain, generally requiring all suppliers to register for the GST, and charge, collect and remit GST on their taxable supplies. 

Along with the obligations resulting from GST registration, “registrants” can generally recover the GST paid on their inputs through “input tax credits” (ITCs), provided the nature of their supplies are “taxable” (i.e., not “exempt”).  ITC eligibility results in a netting out of the GST remittable, whereby the registrant’s legitimate ITC claims are subtracted from GST collected, with the registrant either remitting the excess amount collected, or being refunded the excess ITC amount claimed.  This ITC mechanism ensures that the ultimate burden of the GST does not exceed 7% and that it remains with the final consumer or user of the taxable good, service or intangible.

HST

As of April 1, 1997, the provinces of Nova Scotia , Newfoundland and New Brunswick harmonized their provincial retail sales taxes with the GST.  The result of the harmonization is an additional 8% HST being levied under the ETA on goods and services supplied in these harmonized provinces.  

This is over and above the application of the 7% GST component, resulting in a total value-added tax in these provinces of 15%.  The HST rules generally parallel those for the GST and, before the HST applies, the supply must first fall within one of the three main taxing divisions described above.  Once it is determined that GST applies, there are additional place of supply rules that must be considered to determine whether HST applies, particularly, whether the supply is “made in a harmonized province”. 

PST

Prior to the implementation of the HST, nine out of the ten Canadian provinces levied provincial sales and use taxes, or PST.  With the implementation of the HST, only five Canadian provinces now levy a stand-alone PST, these being each of British Columbia (enacting a Social Services Tax Act), Saskatchewan, Manitoba, Ontario and Prince Edward Island (all employing enactments entitled the Retail Sales Tax Act).  Quebec now employs the “Quebec Sales Tax” (the “QST”), which is almost fully harmonized with the federal GST but does contain some important differences.  The remaining three Atlantic Provinces of New Brunswick, Nova Scotia, and Newfoundland & Labrador all employed the HST, which is fully harmonized with the GST.  The last Canadian province, Alberta , does not levy a PST, and neither do Canada 's three territories of Yukon , Nunavut or Northwest Territories .

The PST is generally levied on the sale, or importation into a province, of tangible personal property, and a limited range of services for final consumption or use within a particular province.  Purchasers are generally required to pay PST at the time of purchase, unless the goods are purchased for resale or a specific exemption applies (e.g., basic groceries, books, and production equipment in some provinces).  

Customs Duties

Customs law generally governs and controls how goods cross Canada ’s borders, by imposing applicable custom duties, taxes and other levies on imported goods, and by prohibiting or restricting the importation and exportation of certain goods, such as firearms, narcotics and cultural property.  Custom duties are imposed on imported goods through the operation of the Customs Act and Customs Tariff.  While the Customs Act contains the administrative rules necessary to (among other things) value imported goods, the Customs Tariff sets out the tariff classification and rates of duties imposed on these goods when they are imported into Canada .

Other Consumption Taxes & Duties

Millar Kreklewetz LLP also has significant experience in advising clients with respect to all other excise tax and duties matters.  At the federal level, this includes the various excise taxes under the Excise Tax Act, such as the air transportation tax, and the Excise Act, 2001, such as the federal alcohol tax.  Millar Kreklewetz LLP also has expertise on all aspects of provincial consumption taxes, including tobacco, gasoline, and property tax.

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