Security providers sort through confusion over HST
June 22, 2010 By Neil Sutton
Mike Granger’s initial reaction to the HST was a typical one: confusion. Few people in the provinces affected by it really had a grasp of how much it would cost them and which goods or services would become more expensive.
“My biggest confusion initially was, we didn’t know if we had to even charge for it. Nobody knew what was going on. But from my book keeper taking seminars and courses, I found out more,” says Granger, owner of White Wolf Security, based in Cornwall, Ont.
The HST officially starts July 1 and goods and services purchased on or after that date are subject to the tax. It’s the contracts or services that had been in place prior to the start date that are more complex to comprehend and account for —both for the person or company providing the service and those consuming it. Depending on how much of the contract is fulfilled prior to the July 1 deadline, HST may apply to a portion or all of it.
The topic is so murky that the Canadian Security Association (CANASA) recently devoted one of its Ontario chapter meetings to the HST and invited an expert to talk on the subject in the hopes that some of the fears could be allayed.
The biggest hurdle most people face is the transition period, says Sonia Vaknin, a partner at chartered accounting firm HS & Partners, LLP, who spoke to the CANASA group in May at a Mississauga, Ont., hotel.
Ultimately, paying and collecting one tax — as opposed to a separate GST and PST — should simplify the process. Or at least that’s the intended effect, says Vaknin.
“The government’s pitch, the way they sold it to us, is that the HST is a streamlined approached for business owners,” she says. “One tax return as opposed to provincial reporting and federal reporting, one audit and you get to claim all your ITCs (input tax credits) whereas before you could only claim five per cent; the eight per cent was a sunk cost, you couldn’t claim that back. Now you’ll be able to claim the full HST, 13 per cent, on your expenses.”
Claiming back more in taxes is going to be a benefit to his business in the long run, says Granger. The transition period has been the biggest obstacle, he says, particularly for clients who end up paying slightly more than they expected if they don’t settle their accounts prior to the July 1 deadline. Clients that straddle the deadline may require extra care, he says, since they may not fully understand how, when or why the HST is being applied.
White Wolf installs alarm systems but also offers a monitoring service through a third-party provider. Granger’s monitoring customers will find slightly bigger monthly bills in their mailboxes after July 1, since they will be forced to pay the full HST on the service, but Granger doesn’t anticipate losing any customers over it.
On a monthly bill of $20, the customer will be charged $1.60 more than they would have paid prior to July.
“People are just going to pay it — it’s an automatic, ‘OK, yes, I’ve got to pay it.’ I don’t think I’m going to lose business from it. It’s not a lot of money in my situation, it’s another eight per cent. I don’t think that’s really going to stop people or have them saying, ‘Oh, I don’t want to have an alarm system.’”
Once the dust settles, a single tax is probably going to be beneficial to security businesses, says Kevin Hincks, president of the B.C. chapter of CANASA and a program manager at SimplexGrinnell in Delta, B.C.
“The PST was always very difficult to apply within our industry — as to what was PST applicable and what was not. The HST, being an overall tax, is certainly going to make the accounting side, particularly for small business owners, a lot easier.”
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