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Does PST need to be collected for resale of music?

Expert: Lloyd Lindsay

Bradley asked:

My brothers, sisters and I have recorded a CD of fiddle music and have bought 500 copies from the manufacturer. Do we need to collect PST if we already paid it to the manufacturer? Are we resellers of this CD and therefore exempt? Do we need an exemption certificate?

Lloyd Lindsay answered:

Ontario imposes a retail sales tax (RST) on purchasers of taxable tangible property and certain services. It's a tax on the final consumer.

The manufacturer charged you the sales tax because the CDs were taxable, and you and your family were the final consumers. If you give the CDs away for free to promote your music, no other sales tax applies. Many businesses pay the sales tax on their advertising materials and office furniture because they use them for their business and do not resell them. However, if you resell the CDs, Ontario RST applies.

In its Small Business Pointer Guide 901, Ontario states: "You must register for a Vendor Permit even if your sales are small – there is no minimum." And then, "you must charge, collect, and remit RST on your taxable sales." This applies even if you sell taxable goods or services at flea markets, fairs, or exhibitions.

Normally, if you have a Vendor Permit and you provide its number to your supplier, you do not pay RST on the purchases you resell to your customers. But, you paid the RST on your purchases. So what should you do?

The manufacturer has the authority to refund the tax to you, but is not required to do so. However, you must provide it with a properly completed Purchase Exemption Certificate to claim an exemption. Alternatively, you may claim a refund directly from the Ontario Ministry of Finance by completing a General Application for Refund of Retail Sales Tax form. The refund claim must be received by the ministry within four years from the date tax was paid.

You can obtain the certificate and the form from the Ontario Government, probably as a download from its web site. Alternatively, you could ask your professional tax advisor to help you obtain them.

About the author

Lloyd Lindsay is a CA, a licensed Public Accountant, Chartered Professional Accountant, and a Certified Management Consultant. He completed the CICA In-Depth Tax Course in 1985 and has been in public practice for over 40 years. Also, from time to time, he teaches on a contract basis.

Lloyd is a member of the Personal Computer Club of Toronto and has hosted its Microsoft Office Special Interest Group for many years.

In addition to providing tax, accounting, and auditing services, Lloyd provides presentations on those topics and on using accounting software, PowerPoint, and MS Office programs.

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