February 22, 2010

Harmonized sales tax

Ontario, construction industry working to clarify HST language

VINCE VERSACE

staff writer

A clearer understanding of when Ontario’s harmonized sales tax is to be included in bids was established in a recent meeting between industry stakeholders and the province.

“Simply put, up until July 1, you include PST (provincial sales tax) for the portion of work you think you will be doing and have done by then,” explained Clive Thurston, president of the Ontario General Contractors Association.

“After July 1, you incorporate the HST.”

OGCA was among a group of industry stakeholders, including the Council of Ontario Construction Associations (COCA) and Ontario Road Builders’ Association (ORBA) who met with provincial officials to discuss issues presented by the HST, which takes effect July 1.

“The industry recognizes the value of the HST — a single tax makes sense — but it is the roll-out that is causing problems,” added Thurston.

The two major issues facing the industry are how to bid for work prior to the July 1 HST implementation date and what to do with projects that are currently underway and run past July 1.

“We have seen numerous attempts by owners to come up with a solution and the contract clauses have run from a single paragraph to many, none of which seemed to work,” said Thurston.

The province will now develop language that clearly explains the confirmed concept of including PST for the portion of work that will be done by July 1. A small task force will be struck to work with the province to find solutions on how to deal with projects spanning the July 1 implementation date, said Thurston.

OGCA and industry stakeholders have offered to organize a webinar information session as well to help explain HST implementation and language.

Industry insiders have said the HST will strengthen Ontario construction’s competitive advantage. Upfront benefits for those who purchase a lot of equipment, such as roadbuilders or sewer and watermain companies, are readily evident. COCA has stated previously a “simpler tax system” will eliminate a lot of bureaucracy and paperwork in a paper-heavy industry like construction.

ORBA has said that the HST allows contractors to claim input credits formerly unavailable to them. An amendment to the standard Ministry of Transportation contract issued in January indicates contractors are not to bill the HST up to and including June 30th, but must include it after July 1.

MTO will continue to negotiate with ORBA to develop a policy to recover the PST imbedded in the contracts, stated a Jan. 15 letter from Phil Hutton, Manager of MTO’s Contract Management Office.

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