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Should imported items be charged HST based on price paid or customer price?

By Lloyd Lindsay |

Tammy asked:

I import items to be sold within my business at cost and mark them up to cover shipping and handling, duty, taxes and of course a little profit. Do I charge HST based on the price paid for the item or the price I charge my customers?

Lloyd Lindsay answered:

The GST/HST rules require that you must register with CRA if your taxable sales over a 12 month period exceed $30,000. If your sales are under that amount and you don’t register voluntarily, you do not charge GST/HST on your sales but you cannot recover the GST/HST you pay on your purchases. If you do register, a sale will fall into one of three categories: exempt, regular taxable, and zero-rated taxable.

Exempt Goods and Services:
These goods and services are exempt and you do not charge GST/HST on them. However, you do pay GST/HST on your purchases where applicable. Some examples of exempt goods and services include: sales of used residential housing, rentals of residential premises, health care, child care, legal aid services, and financial services.

Regular Taxable:
For these sales, you charge the full GST/HST rate on the total selling price. However, you do get an “input tax credit” for the GST/HST you paid on your purchases when you file your returns monthly, quarterly, or annually, depending on your sales volume. The full tax rate varies depending on the Province. For example, the rate for Alberta is 5 per cent and the rate for Ontario is 13 per cent. Also, the GST/HST is destination based and usually you charge the rate applicable to the province where the goods are delivered.

When you file your GST/HST return, you total the GST/HST you charged your customers for the period and subtract the total “input tax credits” (mentioned above) for the same period from that amount. If the difference is positive, you remit the amount to the government. If the difference is negative, the government sends you a refund.

Zero-Rated Taxable:
Zero-rated sales are taxable sales, but the rate is zero and you charge no tax on these sales. However, unlike exempt sales, you are entitled to deduct your “input tax credits” from any GST/HST you charged your customers. And, if the difference is negative, the government will send you a refund. Some examples of zero rated goods and services include: prescription drugs and biologicals, medical and assistive devices, basic groceries, agriculture and fishing, and exports.

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