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Retailers
were also coming off the make-or-break Christmas sales
season and preliminary indications are that they had
little time to do anything else except sell, sell and
sell.
"We
don't have any numbers yet, but we think it's a
100-per-cent certainty that retail holiday sales were up
over last year (2007 over 2006)," says Peter Woolford,
vice-president of policy development and research for the
Ottawa-based Retail Council of Canada, which represents
more than 40,000 retailers across Canada.
Despite
the challenges, Woolford says any move that puts money
back into customers' pockets is good. "Sure, it would
be nice if it (the GST cut) came at another time. But
we'll take it when we can get it."
Retailers
have been through this experience before.
Ottawa
lowered the GST from seven per cent to six per cent on
July 1, 2006, forcing sales clerks to follow lengthy
procedures for refunds or exchanges on items bought when
the GST was one per cent higher.
This
year, there have been reports of the odd store that
wouldn't refund the full six per cent GST for an item
purchased over the holiday sales season, if it was
returned in 2008.
"We've
heard some stories about people making purchases before
the New Year, returning it afterward, and merchants
accepting the merchandise but only providing a credit of
five per cent on the GST, not six per cent," says
John Williamson, federal director of the Ottawa-based
Canadian Taxpayers Federation (CTF), a non-profit
organization dedicated to lower taxes and accountable
government.
"In
some cases, we've even heard of some retailers not having
changed their systems."
Williamson
notes if any merchants continue to collect a GST rate of
six per cent, they must remit it to Ottawa.
One
store in Edmonton posted a sign stating it would only
refund a five-per-cent GST rate for 2007 purchases
returned after Jan. 1.
"I
can understand there are computer issues, but we're not
talking about complex math here," says Alberta CTF
director Scott Henning, who saw the sign during his own
Boxing Day shopping.
"Get
a hand calculator and work it out, it shouldn't be a huge
issue. The principle of the matter is you should get back
what you paid."
Across
the country, it appears the changeover has gone relatively
smoothly for the technicians who were updating cash
systems for merchants.
Rod
Thompson, president and CEO of Winnipeg-based POS Systems
Ltd., which supplies point-of-sales systems and cash
registers to merchants in Ontario and the Prairies, says
life was returning to normal as of mid-January.
"We
went back to work on the Wednesday (after New Year's) and
the calls started coming in. We ended up doing something
in the area of 450 changes, and these were just the ones
we were able to do on the phone with people," says
Thompson, noting that technicians had to be sent out in
other cases.
"I
love our government when they bring down taxes, but it
would be great if they didn't do it on a long weekend or a
time that didn't include New Year's Eve."
Vancouver-based
Donovan Sales Ltd., which also sells cash registers and
point-of-sales systems, hired extra staff to deal with the
crunch.
As
of mid-January, Donovan estimated five per cent of his
customer base was still waiting to have their cash
register systems updated.
To
speed up the process, the company has been sending out
faxes to clients with instructions on how to change their
own registers.
"About
60 per cent of our cash registers are really simple to
change, but it's human nature for people to leave
everything to the last minute," says Margarita
Donovan, the company's director of sales and marketing.
Part
of the last-minute rush is also being attributed to
retailers who did not want to eat the loss of one per cent
on their sales by adjusting their registers a day or two
early. If they dropped the GST to five per cent before the
official January 1 implementation date, Ottawa was still
owed a GST rate of six per cent on sales that were made.
The
possibility of technical glitches can throw retailers
unexpected curves, says Beverly Gilbert, of law firm
Borden, Ladner, Gervais LLP's commodity tax group.
In
one past case, she says, a system was programmed to make a
one-per-cent sales tax change. But instead of dropping it
by one point, it charged no sales tax at all. A number of
purchases were made before the error was discovered, and
being cash sales, the merchant could not recoup the lost
taxes that needed to be collected from the customers.
"Any
change that has been made needs to be well tested,"
says Gilbert. "That was done (in a lot of cases)
through the Christmas holidays with staff running tests
making sure the change was being implemented
properly."
But
these manual interventions also meant many customers spent
long delays in gift-return lines.
Ultimately,
consumers are expected to come out on top, saving between
$10 billion and $12 billion annually due to the two
separate one-per-cent GST reductions.
The
CTF says each one-per-cent GST drop should mean shoppers
will save $150 to $200 a year, or a total of $300 to $400
annually, compared to when the GST was seven per cent.
While
the CTF believes it would be better economic policy to cut
income tax rates, "in general, we have been
supportive of the move to lower the GST from seven per
cent to five per cent," says Williamson.
GST
Q & A
Customers
who have found that they have paid a higher rate of GST
than they should have should contact the merchant in
question for a refund, speaking to a more senior person if
necessary.
Here
are some other scenarios: Q: I invoiced a customer in 2007
for the sale of computers. The customer paid the invoice
after January 1, 2008. What rate of tax do I charge on
this sale?
A:
Since the GST became payable on the date of the invoice
and this was in 2007, you would charge the customer six
per cent GST.
Q:
In April 2007, we had a sales promotion where our
customers purchased furniture without having to make any
payments until April 2008. What rate of tax should apply
to these sales, where our customers received ownership and
possession of this furniture in April 2007, but will not
receive an invoice for payment until April 2008?
A:
If the customers received possession and/or ownership of
the furniture in April 2007, under a written agreement
entered into at that time, the GST is considered to be
payable at the end of May 2007. Since this date is in
2007, six per cent GST applies to the sale of this
furniture.
Q:
In September 2007, a consumer buys a refrigerator under a
layaway plan. Under the written agreement, the consumer
must make six equal monthly payments from September 2007
to February 2008 (the payments become due during each of
these months). Possession and ownership of the
refrigerator will be transferred to the consumer after the
final payment is made in February 2008. What rates of tax
apply to these payments?
A:
GST at the rate of six per cent will apply to the monthly
payments required to be made in 2007. Payments required to
be made on or after January 1, 2008 (January and February
2008) will be subject to GST at the rate of five per cent.
Q:
What rate of tax applies to a magazine subscription
renewal if it is accepted and paid by the customer in 2007
but the magazines will be provided to the customer in
2008?
A:
If the magazine subscription renewal payment is made in
2007 or becomes due in 2007 the amount will be subject to
six per cent GST, even though the magazines will be
provided in 2008.
Source
: Business Edge - Calgary, Alberta, Canada, dated
25/01/2008
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