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Rakhi Vasavada
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3868
Experience:  Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
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Does sales tax of BC 12% and ON 13% applies for the sell of

Customer Question

Does sales tax of BC 12% and ON 13% applies for the sell of travel services?

a) tax applies to sell of travel services outside of Canada to Canadian customers and

b) sell of travel services outside of Canada to customers from outside of Canada.
Submitted: 10 months ago.
Category: Finance
Expert:  Rakhi Vasavada replied 10 months ago.
Dear Friend,

Hello and welcome. Thank you for providing an opportunity to assist you.

British Columbia -- There is a change after April 1, 2013.

As of April 1, 2013, you will pay a varying percentage of tax in British Columbia. Whether you pay no tax, 5% tax, or 12% tax depends upon the type of service.

Travel services that are still tax exempt (after April 1, 2013):
  • Public transit fares
  • BC Ferries fares
  • Basic groceries
  • International air travel, Continental U.S. flights excluded, when originating in BC
  • International rail, bus, or ship travel (originating in BC)

Travel services that will incur only 5% GST (after April 1, 2013):

 

  • Domestic travel by air, rail or bus (originating in BC)
  • Continental U.S. air travel (originating in BC)
  • Restaurant meals
  • Attraction admission fees, including for passes for ski resorts, museums, theater performances, sports events, and driving ranges
  • Books, newspapers, and magazines
  • Snack foods
  • Taxis
  • Camping sites
  • Massage therapy

Travel services that will incur 5% GST and 7% PST (after April 1, 2013):

 

  • Alcoholic beverages (10% PST)
  • Accommodations (plus any additional hotel tax)
  • Souvenirs

For detailed list refer:


http://www2.gov.bc.ca/assets/gov/topic/BED47DA4EBDBA60A5F28622B8B2E1451/uploads/whats_taxable_whats_not.pdf

 

Ontario -- In Ontario, there is a uniform rate of 13% on all such services. On July 1, 2010 the 13 per cent Harmonized Sales Tax (HST) took effect in Ontario.

 

Since July 1, 2010, instead of paying 13 per cent sales tax to two governments (eight per cent to Ontario and five per cent to the federal government), there is one sales tax – still 13 per cent – collected by the federal government.

 

Further to your question, it would be applicable anyway, if you are selling to canadian residents / non residents or for that matter anyone. It will be applicable on "BOTH" of the scenario that you mentioned in your question.

 

I am sure this would help.

You may please leave a positive rating if this helps as this is the only way we get compensated for assisting you. Alternatively please feel free to reply back if you need further assistance.

Warm Regards

 

Customer: replied 10 months ago.

Thank your detailed answer. Can you please clarify.


 


We are tour operator that sells travel to Russia and Europe. We don't produce any goods in Canada itself, we are just selling service.


 


Our clients are Canadians, as well as international travelers from more then70 countries. For each of the bookings that are made, sales tax will apply?


 


For example, we offer an all inclusive cruise from Moscow to St. Petersburg, and it covers transportation, entrance fees, loging and meals. What sales tax will be due for that?


 


Thank you.

Expert:  Rakhi Vasavada replied 10 months ago.
DearvIvan,

Hello and welcome. Thank you for your follow up reply.

On all the bookings and all that you mentioned, it will attract sales tax at 13%. It would be exempt only in those international flights which originate from Canada.

Rest on all -- sales tax would apply.

I a sure this would help.


You may please leave a positive rating if this helps as this is the only way we get compensated for assisting you. Alternatively please feel free to reply back if you need further assistance.

Warm Regards
Rakhi Vasavada, Financial and Legal Consultant
Category: Finance
Satisfied Customers: 3868
Experience: Graduated in law with Emphasis on Finance and have have been working in financial sector for over 12 Years
Rakhi Vasavada and 4 other Finance Specialists are ready to help you
Customer: replied 10 months ago.


I actually think that your answer might nit be correct. There are a lot of agencies who work for commission of 10%, and obviously they cannot pay 13% sales tax. They don't charge their customers ether, as we always sell only one set price with no add on taxes. Please advice, how they avoid paying these tax.

Expert:  Rakhi Vasavada replied 10 months ago.
Dear Ivan,

I am aware of this. There can be only two possibilities. Either they are selling only those services which are originating from Canada, or, they are evading taxes.

Secondly, there is also possibility that the 10% margin is over and above the sales tax that they must be invoicing.

Apart from this, I am absolutely sure about interpretation the laws and my answer to you.

I am sure this would help.


You may please leave a positive rating if this helps as this is the only way we get compensated for assisting you. Alternatively please feel free to reply back if you need further assistance.

Warm Regards
Customer: replied 10 months ago.

non service does not originate from Canada, and, these are big and small agencies, like Carlson vagonlit, and I'm sure they are nit avoiding taxes.

 

 

 

I double checked with customers as well. They do not pay additional sales tax. So how canxthey be receiving 10% commission, paying 13% sales tax on whole amount?

 

surely, they don't pay it. If not, what form of business registration, or travel agent status is needed to about it? Our lawyer in Canada told that from his,knowledge sakes,tax is,not paid ether. May be specific provinces?

Expert:  Rakhi Vasavada replied 10 months ago.
Dear Ivan,

Hello and welcome again.

I have been going through your question time and again, but I do not see any deviance in what I anwered earlier in two occasions. I am sure that customer may not be paying separately but it must be included in the overall price.

Having said this, this is certainly province specific. You check this out for travel services operating in ON and BC.

For example, let us take travel services. The airline MUST be charging the sales tax. The agents might not be separately charging and the customer would not be seeing them separately. It must be there in the total fare break up from the airline level.

I confirmed this with one of the CRA persons as well and I would still not change the opinion that I gave you before.

Let me know if this helps. If you feel if I have left out on any aspect of your question, still, I shall opt out of this and let other expert assist you with this.

Warm Regards
Customer: replied 10 months ago.

Thank you, but no, it didn't help.


 


Here is a simple scenario. We are an american company, and we sell 1 complete all inclusive price, no additional taxes.


 


Our canadian customers are coming to us via agent, and buying service for complete price, and agent receiving commission.


 


So, for example, sales price is $1000. Customer paying agent $1000 as well. Agent received $100 from it as a 10% commission. Obviously, he cannot pay 13% or $130 in sales tax. We are sure that customers also not paying additional $130 on top of $1,000.


 


This is a common agent commission practice that happening all the time from small to big agencies, and surely they are not avoiding tax.


 


Particularly, it does not also seems right that 13% tax should be paid at all. Because, all travel industry mark ups are less then that, and usually agencies have 10-12% mark up on services.


 

Expert:  Rakhi Vasavada replied 10 months ago.
Dear Ivan,

Thank you for your follow up reply. It is first time I hear that yours is an American corporation.

This explains your situation better. Now going by your example, the Agent in Canada will pay 13% out of his commission. i.e. he pays 13% of $100, which is his commission and not on entire $1000.

The agent would be subject to his ONLY IF he is based in Canada irrespective of his end clients are Canadians or not.

I a sure this would help.

You may please leave a positive rating if this helps as this is the only way we get compensated for assisting you. Alternatively please feel free to reply back if you need further assistance.

Warm Regards

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