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With Bill C-311 pending in Parliament, are you aware of the possible changes to the Intoxicating Liquor Act could have on your business? If this Bill passes, wineries across Canada will be able to process online wine orders and ship directly to individual customers in other provinces. And although this brings new marketing opportunities to winery owners, you also need to understand how the GST/HST “place of supply” rules impact your business.
The Goods and Services Tax (GST) is a federally administered tax and is applicable all across Canada, unless a province has a Harmonized Sales Tax (HST). The GST applies at 5% and the HST is currently 12% in B.C., 13% in Ontario, New Brunswick and Newfoundland and 15% in Nova Scotia. The other provinces all have the GST at 5% and a provincial sales tax with the exception of Alberta and the Territories.
When your business is registered for the GST/HST you have a requirement to collect the proper rate of tax. The “place of supply” rules for tangible property are dependent on where the legal delivery of the product occurs. The rate of tax applicable to the sale will be dependent on where the vendor – the winery, delivers the product. Here are several examples to highlight the different scenarios that may be applicable:
Winery A is located in B.C. and sells its product online to consumers. Mr. Cooper logs into the Winery A’s website and orders one bottle of wine. The wine is limited edition so Mr. Cooper was anxious to reserve his bottle. He pays for the wine online and notifies the winery that he will be coming to the region in the next week so arrangements are made to pick up the wine in person. Mr. Cooper completes the transaction online from his home in Alberta. In this scenario, he would be required to pay HST at 12 % on the bottle of wine as he will be taking possession of the bottle at the winery in B.C., and therefore that is the place of supply.
Winery A has another customer Mrs. Velka. Mrs. Velka lives in Ontario and had visited Winery A on her summer vacation to B.C. several months earlier. She greatly enjoyed the sparkling wine that Winery A produces and has not been able to find it in any of her local wine shops. She goes online to Winery A’s website and is delighted to discover that she is able to purchase a bottle of her favourite Sparkling wine online. Mrs. Velka completes her purchase with her credit card and one week later Winery A ships the bottle to her doorstep. In this case Mrs. Velka has received possession of the bottle of wine at her home in Ontario, so Ontario is the place of supply. Winery A is required to charge Mrs. Velka 13% HST on this bottle of sparkling wine.
Winery A arranges with a tour company to be a stop on their winery tour. In June 2012, the first tour bus arrives at Winery A. The tour is very successful and most of the tour participants arrange to purchase wine. Mr. and Mrs. Laveck will be visiting several additional spots before they head home to Manitoba. They arrange with Winery A to have their purchase shipped to their home in Brandon in two weeks time. The wine is paid for while they are on site however Winery A will be shipping the product to their home in Brandon. In this case, because Winery A is shipping the product to Brandon, they are able to charge Mr. and Mrs. Laveck GST at 5%. Since Winery A has arranged for the wine to be delivered in Brandon, Manitoba, it becomes the place of supply.
Winery A also sells some wine to Mr. Wong who is part of the same tour. Mr. Wong lives in Saskatchewan and decides that he wants to have his wine delivered to his home. As Mr. Wong has other purchases from B.C. that he also wants to send back home, he arranges for the freight company to pick up the wine at the hotel along with his other packages. Since Mr. Wong took delivery of the wine at the Winery in B.C., Winery A is required to charge Mr. Wong 12% HST. Although Mr. Wong is having the wine delivered to his home in Saskatchewan, he has arranged for the delivery, not the winery and therefore is required to pay tax to Winery A at the B.C. HST rate of 12%.
The examples above are just a few of the scenarios that could be applicable to your winery if Bill C-311 becomes law. Clearly, a good working knowledge of the GST/HST “place of supply” rules will become even more important for your retail team. A qualified advisor can help you ensure you are collecting GST/HST at the appropriate rate and that you are structuring you sales in a way that will benefit your customers.
Heather Weber, CGA is the Indirect Tax Leader for MNP and Geoff McIntyre, CA, is the Food & Ag Processing Leader for MNP’s Okanagan Region. To find out what Heather and Geoff can do for you, contact them at 250.763.8919 or [email protected] or [email protected]
Please note that this article does not provide any comments on Excise Tax or any provincial liquor taxes that may be applicable.
Related Topics:Government; GST; HST; Tax Rates
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