Harmonized Sales tax is coming in April. So what does this mean for the traveller? For the next few months, we will be charging 5% federal sales tax and 10% on top of that. So this means we are charging 15.5% tax on most purchases. On April 1, the tax will be blended into one harmonized sales tax (HST) at a rate of 14%. This means that for most purchases, the price will go down by 1.5%.
If only life were so simple. Some goods are currently exempt from provincial sales tax. On those, you are paying only 5% federal tax today. Come April 1, the tax on some previously exempt items will rise to 14%.
Confused yet? Let’s add in another wrinkle. Some small businesses do not need to charge federal tax. With the coming of HST, these businesses will have the option of charging the new HST or not.
Let’s take a small Bed and Breakfast as an example. Let’s say your room rate is $100. Because they are exempt from GST, you would pay just 10% provincial tax for a total of $110. After April 1, this Bed and Breakfast decides to opt into the HST: your room will cost $114 or an increase of about 4% to you the visitor. The other B&B that also charges $100 for their room decides not to opt into HST and your cost for a room is $100. That is about 10% less than you were paying last year.
So it pays to check. When you are making your accommodation reservation, ask for the full price with tax. That way there will be no surprises. See that the Beside the Trail Bed and Breakfast has decided to charge no tax next year.
Enjoy your PEI holiday.