Federal/Provincial Reciprocal Tax Arrangements Guideline

Date last revised: 2010.02.15

Please note that this policy will apply to the Human Resources and Skills Development Canada (HRSDC) department including Service Canada (hereinafter referred to as the 'Department' or 'Departmental'.)

Table of Contents:

1. Objective
2. Statement
3. Responsibility
4. Requirement
   • 4.1 General Requirements
   • 4.2 Sales of Goods and Services to Provinces
   • 4.3 Purchases of Goods or Services by the Department

References
Appendix A - Defenition of Technical or Special Terms

1. Objective

This document describes the policies applicable to federal-, provincial- and harmonized sales taxes (HST) as well as excise taxes in relation to sales and purchases of goods and/or services by the Department.

2. Statement

HRSDC must respect the provisions of the Federal-Provincial Reciprocal Taxation Agreements (RTA) and Comprehensive Integrated Tax Coordination Agreements (CITCA) which were concluded with provincial governments in respect of the payment of certain provincial taxes and the collection and remittance of PST/QST and HST are adhered to by the Department.

3. Responsibility

Financial Services through the account verification and payment process is responsible for ensuring compliance to TB Policy, RTAs and CITCAs.

4. Requirements

4.1 General Requirements

The non-participating Provinces are exempt from paying Provincial Sales Tax. However, all sales or purchase documents must show the appropriate exemption number in order to avoid paying the PST. The following table lists the account numbers by Province.

Note that an exemption certificate will be used for Quebec, Saskatchewan, and the Northwest Territories. The exemption certificate consists of the wording: ‘This is to certify that the goods and/or services ordered or purchased by the Department are being purchased with Crown funds and are therefore not subject to sales and consumption taxes of the Province of (name of Province)’.

PST collected will be deposited in the Consolidated Revenue Fund and credited to a PST liability account. Whence the tax is remitted to the appropriate province, a debit entry will be made.

The Department is responsible for maintaining the proper records on the taxability of sales and taxes collected, remitted and owing to allow verification by the partaking provinces.

4.2 Sales of Goods and Services to Provinces

4.2.1 To Participating Provinces

Participating provinces are Newfoundland, Nova Scotia and New Brunswick where CITCA or in other words the HST provisions are in force. The Department is required to collect and remit HST on all taxable sales to a recipient in a participating province (HST place of supply rule).

4.2.2 To Partaking Provinces

Partaking provinces are all those which have signed a RTA with Canada.

In the provinces the Department is required to collect and remit general or provincial sales tax/Quebec sales tax on sales of all taxable goods or services. Non-participating Provinces will collect PST which is part of the Harmonized Sales Tax only if they are doing business with the participating Provinces, and it is based on the "Place of   Supply" rule.

4.3 Purchases of Goods or Services by the Department

4.3.1 From Participating Provinces

The Department must pay HST to suppliers of taxable goods or services it receives in participating provinces.

4.3.2 From Non Participating Provinces

The Department is exempt from paying PST for goods and services it receives in all non-participating provinces.

4.3.3 Ancillary Taxes For Purchases

Ancillary taxes apply to purchases of tobacco, gasoline and vehicle registration fees. PST for these goods is applicable in all provinces except Alberta, the North West Territories and the Yukon.

The ‘admission’ and ‘amusement’ PST is applicable in Nova Scotia and New Brunswick.

A broadcast advertising and insurance tax is applicable in Quebec.

An ‘environmental fee’ and ‘hotel room tax’ is levied in British Columbia.

The ‘advance disposal surcharge’ is payable in Alberta.

Ontario has added an Environmental Fee effective April 1, 2009 for new electronic and electronic equipment supplied for Ontario

4.3.4 Third Party Purchases

This applies mainly to departmental employees in the course of employment. HST is payable for purchases in Newfoundland, Nova Scotia and New Brunswick. PST/QST is payable in all other provinces except Alberta, and the three territories.

PST/QST for meals, travel incidentals, taxi services and purchases out of petty cash is applicable in all Provinces except in Alberta.

PST/QST is levied for temporary accommodation (i.e. hotel) and gasoline in all provinces.

Motor vehicle fleet management services are subject to PST in Newfoundland, Nova Scotia and New Brunswick. All other provinces exempt these services from PST.

4.3.5 Federal Sales and Excise Taxes

The Department is not exempt from paying customs and excise duties and federal sales tax on goods purchased from foreign suppliers.

Refunds for excise tax or federal sales tax may be claimed where the amount of the refund significantly exceeds the administrative cost of maintaining records and submitting and processing a claim. Such refunds shall be credited to the appropriation to which the payment was originally charged.

5. References

• Treasury Board Secretariat, Controllership, Policy on the Collection and Remittance of Provincial Sales Taxes (Application of Reciprocal Taxation Agreements and Comprehensive Integrated Tax Coordination Agreements)
• Treasury Board Secretariat, Controllership, Policy on the Application of the Goods and Services Tax and the Harmonization Tax in the Departments and Agencies of the Government of Canada
• Policy on the Duty to Accommodate Persons with Disabilities in the Federal Public Service, Treasury Board Secretariat.
• http://www.fin.gc.ca/branches-directions/tpb-eng.asp

Appendix A - Defenition of Technical or Special Terms

Excise tax - is an internal tax levied on the manufacture, sale or a commodity within a country. This tax usually takes the form of a license.

Non-participating province - means a province or territory that is not a party to a Comprehensive Integrated Tax Coordination Agreement (CITCA).

Partaking province - means a province or territory that is a party to a Reciprocal Taxation Agreement (RTA).

Participating provinces - means the provinces of Newfoundland, Nova Scotia, and New Brunswick, and such other provinces that may join in the Comprehensive Integrated Tax Coordination Agreement from time to time.

Third party purchases - are purchases by employees in the course of employment related travel including supplies and transportation, meals, accommodation, taxi services, and incidental travel related expenses, as well as purchases out of petty cash.