A year ago, Lao Wang bought a cleaning service store. He bought assets, which were divided into several parts. Tools accounted for 100,000 yuan, a construction vehicle was used to load cleaning tools and transport them, which cost about 40,000 to 50,000 yuan, and goodwill, which cost about 100,000 yuan. In total, he spent nearly 300,000 yuan.
After Lao Wang got the engineering vehicle, he went to the Ministry of Transportation to register the license plate. During the registration process, the staff collected another 13% tax based on the mileage. Lao Wang naturally thought that this 13% was the usual HST, and he should be able to fill it in the tax form as an input tax credit (ITCs) for HST to offset the tax. But unexpectedly, such a normal action attracted the tax bureau. What's going on? It turns out that this part cannot be used as HST deduction, and the tax bureau firmly does not allow Lao Wang to do so. But why not? To be precise, since the Ontario sales tax merged the federal part and the Ontario part into a unified business tax, the 13% tax includes the Ontario tax and the federal tax, but in fact, the tax Lao Wang paid for the license plate of the engineering vehicle he bought belongs to PST, that is, retail tax, and cannot be simply and crudely equated with HST under normal circumstances. So how to operate this retail tax so that it is not paid in vain or can be refunded? When businesses sell used cars to each other, the following three situations can help you exempt or refund this part of the retail tax.
The first one is that if both the buyer and the seller have HST tax numbers, then the two parties agree on a purchase price based on the market price, and the seller charges the buyer HST. The buyer then takes the purchase invoice to the Ministry of Transportation to go through the transfer procedures, and no longer needs to pay PST.
The second type is that both the buyer and seller pay HST. The buyer buys all the assets. Because it is a transfer of assets as a whole, the value is too large. Therefore, if both the buyer and seller fill out a form called GST44 at the same time, the entire transaction can be exempted from GST, that is, no HST is required. After that, when you take the contract between the buyer and seller to the Ministry of Transportation to register the vehicle, the Ministry of Transportation will no longer charge 13% PST.
The third situation is like Lao Wang's situation. He didn't understand at first that if he followed the second situation, he wouldn't have to pay PST for the license. When he applied for the license, he paid 13% PST to the Ontario Ministry of Transportation, but this cannot be used to offset HST ITCs. It is PST. So after paying, he can take valid documents and the sales contract of the entire set of assets at the time to the provincial tax bureau to fill out a PST REFUND form called 1181E, and then he can get the PST back. So Lao Wang just meets the third situation. In fact, since the Ontario unified business tax, GST and HST are combined in most cases, and GST can be refunded ITCs most of the time, but there are some items that only have PST and no HST, and insurance is one of them. Any type of insurance in Ontario only has PST, which is 8%, so insurance has no ITCs to offset. If you find that your car insurance, home insurance, and life insurance are all charged 8%, then it means that it can only be treated as an expense. Companies often buy used cars because they want to save money, but if they don't handle it properly, they will waste taxes and ultimately money.