In the 2012 Manitoba Budget (April 17, 2012), the government basically added this blurb to the top of their “Business and Innovation” list …
– Cut red tape for businesses by reducing how often small businesses have to file sales tax.
What Does That Mean?
Basically, you can see from the Retail Sales Tax (RST) Bulletin No. 004 – originally issued April 2000 – was updated with the highlighted change in yellow in April 2012:
Vendors must file a tax return and remit the RST collectable to the Taxation Division. The tax return filing frequency is based on the average RST collectable per month as follows:
– $5,000 or more – monthly;
– $500 to $4,999 – quarterly;
– Less than $500 – annually.
A lot of my clients, including myself, received *the notice* today announcing that effective July 1, 2012 my RST account has been changed to file less often.
My services are subject to both RST (I like to call it Provincial Sales Tax or PST) and GST and do most of my billings between February and June. However, on an annual basis, I fall in the last category that averages it out less than $500 per month (or, $500 divide by 7% times 12 = “less than $85,714.20 sales per annum” subject to RST) and must file on an annual basis now. I am to report a short cut-off period for July 1, 2012 to December 31, 2012 but, after that all my filings will be on a calendar year basis.
What Does This Mean To Me?
1) Loss of Commission – It’s been a few years already that Manitoba Finance had eliminated the commissions available to vendors who collect more than $3,000.00 PST per month. But for little vendors like me who collect less than $500 per month .. our liability has just increased!
Previously, if I collected $500 per month RST (or, $500 divide by 7% equals sales under $7,142.85 per month) my commission would be calculated as follows:
– $30.00 on first $200 collected
– $3.00 or 1% of remaining difference up to $3,000.00
> total commission $33.00 >> x 12 = $396.00 lost commission
I should mention, that at this time I have not seen or heard how the new calculation will be for commissions – or, if it will even be available. I doubt it will match any commission one might get if filing monthly and this is just an administrative “save paper” and really just a matter of filing less but remit the same amount of NET provincial sales tax collected. I do hope I am wrong however!
2) Now I Must Save To Pay RST – Retail Sales Tax (and Goods and Services Tax) is trust funds collected by me/you on behalf of the government and do not belong to me/you. However, Now I must collect and save all the money somewhere so I have it available to remit 20 days after the year ends on January 20th or face the consequences! If I collect $500/per month/ for 12 months on average .. that means I have to have $6,000.00 cash lying around – AFTER CHRISTMAS – to remit to the government.
Yes, Yes, Yes .. of course I *should* have the cash available because .. it’s trust funds and belongs to the Government, right? Let’s just stop there and think of the reality of most situations however. This will be hard to do for a lot of businesses including myself.
I think I am going to open another savings account at a different bank or credit union to start saving for my RST Returns of future years. Billings for me in December and January are the worse because most of my corporate clients have December year ends and I don’t even get the work in that fast! Also, this is usually my transition period for research and personal development and practice for the upcoming personal income tax season and doing more non-billable work than billable work. Add family, friends and the holidays to the mix, and you know I want to earn interest on savings for my RST filings – than pay interest and penalties for either late filing or late payment.
Should You Be Registered?
• Any person carrying on a business in Manitoba (except for small businesses with annual taxable sales under $10,000) must have a valid RST number issued under The Retail Sales Tax Act before making any taxable sales in the province.
• Small businesses with annual taxable sales under $10,000 are not required to register and collect RST. These businesses are allowed to pay RST on their purchases and not collect RST on the selling price of their goods and services. These businesses must indicate on the sales invoice that RST is included in the price (RST must not be itemized on the invoice)
– Source: http://www.gov.mb.ca/finance/taxation/bulletins/004.pdf
What’s New In The Retail Sales Tax World?
RST has been around for a while now, so you probably know if you should be charging PST or not. However, there has been changes effected July 1, 2012 that came about in the budget:
The following personal services will be taxable, effective July 1, 2012: spa treatments, non-medical skin and nail services (such as pedicures, manicures and facials), hair services (including haircuts, hairstyling, hair removal and augmentation), tattooing and piercing. No sales tax will apply to haircuts costing less than $50.
Sales tax will be applied to prescribed insurance premiums under a contract of insurance, effective July 1, 2012, other than for health, accident or sickness, Autopac, or individual life insurance. This includes property and casualty insurance, group life insurance, trip cancellation insurance, baggage insurance, and land titles insurance. The tax will apply where the insured is a person resident in Manitoba or the premiums are paid in respect of property located in Manitoba.
The estimated additional full-year revenue from these sales tax measures is +$106.5 million
Did you get the notice? How do these changes affect you and your business?