The new Harmonized Sales Tax (HST) will have an impact on every industry that provides contract services in Ontario and B.C., including trades people.

That means HST will be applied to all painting services provided in B.C. and Ontario after July 1, 2010. This will be the case even if the contract commenced before July 1, 2010. The exception to this will be if a consumer has prepaid for the service prior to May 1, 2010. Before May 1, 2010 contractors are not required to charge HST even if the service will be provided after July 1, 2010. After May 1, 2010 if a consumer wants to prepay for a service contract, the contractor will be required to collect HST for any services to be provided after July 1, 2010.

As a general rule, if the service is all or substantially (90 per cent or more) completed before July 1, 2010, then HST will not apply to the contract. However, if there is still work to be done, then HST will be levied against the services performed after July 1, 2010.

Tangible personal property
Consumers and businesses alike may engage in contracts for the purchase/sale of personal property. This may require a down-payment upon initiation of the contract for property such as customized furniture, vehicles, or made to order parts. HST will apply to the goods that are delivered, and for which ownership is transferred to the recipient, on or after July 1, 2010.

Leases of personal property such as automotive, equipment, and tangible personal property (for example, furniture) may also be impacted by HST rules. Any payments made prior to July 1, 2010 will not be taxed HST, whereas payments made after this date will be subject to the tax.

While the rules for contracts may seem straight forward, the above discussion does not take into consideration where the goods or service will be delivered. When services are provided in more than one province it will be important to seek the advice of an Indirect Tax Specialist.

If you don’t know when and how to start charging and tracking HST, don't worry. There is tax software out there to help you. Most updated accounting software (try Simply Accounting 2010 http://www.simplyaccounting.com) gives you a friendly reminder to set up the new HST tax code. It even fills in the rate for you. On July 1, the conversion to the new rate will be automatic. Get software that keeps track of all the GST/PST and HST you pay to vendors and collect from customers. So when it’s time to file, you just run a report to get the information you need.

Heather Weber, is a CGA and Indirect Tax Services Leader for Meyers Norris Penny. Meyers Norris Penny is one of the largest chartered accountancy and business advisory firms in Canada.

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