I sense that there is a lot of confusion in Ontario and BC regarding impact of the pending changeover to the Harmonized Sales Tax regime. I recently prepared a detailed analysis of the sales tax regimes across Canada for Flowers Canada and I found that it is not only the florists who are confused. Even the people in the various provincial tax offices I spoke with across the country are confused. And they are not entirely consistent in the way they interpret and apply their own provincial sales tax legislation. So I'm not at all surprised that the changeover to a new sales tax regime is giving rise to lots of anxiety. But as I noted in my earlier post in reply to Mikey's original comment in this thread, the HST system is actually simpler and much fairer as it levels the playing field and gets rid of all the confusing exemptions that apply differently to florists in-province and those from outside the province. Our shop is located in Newfoundland where we have had the HST for years and that tax has not led to the sorts of problems that people in BC and Ontario are speculating about.
Artistry in Bloom notes that BC currently charges provincial sales tax (PST) on value of the order, but not value of delivery. Ontario and most other provinces charge PST on total value of orders, including delivery. But according to the provincial tax officers I spoke with, none of the PST provinces other than Quebec charge PST on wire orders originating from outside the province. To make matters more confusing, some, but not all of the PST provinces charge PST on B2B orders that come directly from out-of province florists or out-of-province customers. This makes no sense whatsoever, and it makes life more difficult for florists who are WS-free since in provinces that tax direct B2B orders since it allows out-of-province OGs who send orders through a wire service to sell the same product at a 7-8% discount.
Florists in HST provinces have to charge and account for the HST on the full value of every order filled, whether the order originates from within province or from outside the province, or even from outside of Canada. Any Canadian florist sending an order to an HST province is also required to charge and collect the HST from the original customer. The sending florist then pays the HST to the filling florist and claims an input tax credit (ITC) for that tax on the GST/HST tax return that they submit to the government. The situation with the different provincial sales tax regimes is much more complicated. Some items are taxable and others are tax exempt. But you cannot claim any input tax credit in cases where you have had to pay PST.
The situation in Canada would be much simpler for everyone concerned if all provinces adopted the HST, even if the rate charged in each province differed slightly to reflect the different tax rates that each province charges. At least under the HST, the basis on which the tax is charged is consistent across the board. And the fact that vendors can claim ITCs when they forward orders to be filled by another florist means that consumers are not subject to any double taxation.
The much bigger issue facing Canadian florists relates to the way in which WS orders originating from outside of Canada do not include any provision for sales tax, whether federal or provincial. The worst offenders in this regard are the WS dot coms and the big US-based national OGs like Broadway Florists, Wesley Berry and Just Flowers. Consumers who order through a US-based OG are given the impression that they can purchase flowers for local delivery without having to pay any sales tax. I know we have to account for the sales tax and we are always entitled to deduct the amount for tax from the total amount received on incoming orders, but the customer doesn't know this. And deducting the tax from value of the order doesn't do much good when we are expected to fill an order for a specific codified item which has a fixed recipe and the purchaser has a pretty digital photo of what they expect to receive. When the filling florist sends an arrangement of lower value because tax has been deducted, that reflects badly on the filling florist as well as the sending florist and it brings our entire industry into disrepute. We always have the option of asking for a price increase to cover the tax. But that gets to be a royal pain, especially at busy times like Valentines and Mothers' Day when the OGs are most active. Getting rid of wire services entirely is one way of dealing with this problem. Blanket refusal of incoming wire orders from out-of-country is another option. But simplification of inter-jurisdictional sales tax regimes would also be a big help.
I am not familiar with the different sales tax regimes that apply between states in the US so I can't say whether the same situation as I have described for Canada applies there. I'd be interested in learning more about this from other participants in this thread. From what i have seen so far in this thread, I can only imagine what a nightmare it must be to have to obtain a valid vendor tax number from every out-of-state or out-of province florist who sends orders to be filled.
John Frecker
Holland Nurseries
St. John's NL
www.newfoundlandflorist.com
