1. Effective date
(a) The present document contains the policy concerning the
application of the reciprocal taxation agreements (RTA) with the
provincial and territorial governments for a five year term
starting January 1, 1994 and the Comprehensive Integrated Tax
Coordination Agreements (CITCA) of October 1996 with the
provinces of Newfoundland, Nova Scotia and New Brunswick.
(b) This policy is effective April 1, 1997.
2. Preface
(a) The requirement for federal departments and agencies to
charge, collect and remit provincial sales tax was initiated by a
Cabinet decision of September 7, 1961 [X-0325-61RD(01)] which
directed all government departments and agencies selling goods to
register with provincial authorities in provinces which levy
provincial sales tax and to collect and remit this tax to the
appropriate province.
(b) Subsequent to the 1961 Cabinet decision, Part VII of the
Federal-Provincial Fiscal Arrangements and Federal-Provincial
Post-Secondary Education and Health Contribution Act (1985
Revised Statutes) provided that RTA between Canada and the
government of any participating province and territory shall
contain provisions for the collection and remittance of PST, and
the payment of sales taxes or other similar taxes levied by the
other level of government. In this policy, "province" and
"provincial" are used to designate both provincial and
territorial governments.
(c) On October 23, 1996, a harmonized sales tax (HST) was
announced. An amendment to the Excise Tax Act to give
effect to the HST was given royal assent on March 20,
1997. Three provinces, Newfoundland, Nova Scotia and New
Brunswick, have signed CITCA with the federal government. Canada
and the CITCA provinces have agreed to pay the HST in respect of
supplies acquired by their governments, agents and entities. In
these three provinces, the HST replaces the federal Goods and
Services Tax (GST) and the provincial general sales taxes (PST)
that would otherwise be charged.
(d) The RTA and CITCA are complementary and both types of
agreements may run concurrently.
(e) This chapter includes all the information that may be
required by departments and agencies to comply with the RTA and
CITCA. Departments should also refer to the Policy on the
Application of the Goods and Services Tax and Harmonized Sales
Tax in the Departments and Agencies of the Government of
Canada, Comptrollership, Treasury Board Secretariat
publication, for details regarding the accounting for
HST.
3. Definitions
Non-partaking province (province ne prenant pas
part) - means a province or territory which is not a party to
a Reciprocal Taxation Agreement.
Non-participating province (province non
participante) - means a province or territory which is not a
party to a Comprehensive Integrated Tax Coordination
Agreement.
Partaking province (province prenant part) -
means a province or territory which is a party to a Reciprocal
Taxation Agreement.
Participating provinces (provinces participantes)
- means the provinces of Newfoundland, Nova Scotia, and New
Brunswick, and such other provinces as may join in the
Comprehensive Integrated Tax Coordination Agreement from time to
time.
Third party purchases (achats de tiers) - 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.
4. Policy objective
To ensure that the provisions of the Federal-Provincial RTA
and CITCA concluded with provincial governments in respect of the
payment of certain provincial taxes and the collection and
remittance of general PST and HST are adhered to and implemented
by all federal government departments and agencies.
5. Policy statement
The policy of the federal government is to fully comply with
the terms of the RTA and the CITCA concluded with the provinces
and territories and to pay and to collect and remit all the
applicable taxes.
6. Application
This policy applies to all organizations considered to be
departments within the meaning of section 2 of the Financial
Administration Act.
7. Policy requirements
7.1 Collection of provincial sales taxes and
HST
(a) Departments must ensure that adequate policies and
procedures are issued to comply with the reciprocal taxation
agreements and comprehensive integrated tax coordination
agreements and must establish and maintain the procedures for the
administration of the PST and HST, including provisions for the
timely adjustment of tax collection procedures when the tax of
goods or services changes.
(b) All federal departments which sell taxable goods and
services in non-participating provinces shall
register with provincial authorities in the provinces which levy
a sales tax and submit the appropriate PST returns required by
the provinces.
(c) For HST purposes, federal departments which sell taxable
goods and services in participating provinces need not
register as vendors with these provinces as the Business Number
used for federal HST registration is sufficient for the
collection of HST. Provinces may require registration for other
related purposes.
(d) All federal departments which sell taxable goods and
services in participating provinces shall register as
vendors with Revenue Canada and submit the appropriate HST
returns required by Revenue Canada. Departments which are GST
registrants are automatically registered for HST and therefore do
not require a separate registration.
(e) Unless the purchaser is exempted from payment of the PST
and/or HST by legislation or is the holder of an exemption
license, departments and agencies registered as vendors are
required to collect and remit PST and/or HST on all taxable
sales.
7.2 Payment of provincial sales taxes
(a) Departments will claim exemption from paying provincial
general retail sales taxes in all non - participating
provinces and territories on purchases of goods and services
in the name of Canada. This includes purchases made with
Government of Canada acquisition cards.
(b) Departments will claim exemption from paying provincial
general sales tax in non-participating provinces
where they have entered into an agreement for motor fleet
maintenance service for vehicles owned by Canada and where the
contractor has accepted the liability for payment to third
parties for goods and services to maintain the vehicles. Such
payments to third parties are deemed to be made by Canada, and,
as a result, are exempt from PST at point of purchase in all
provinces except Alberta, the NWT and Yukon.
(c) PST is payable on purchases by third parties while on
government business (e.g. petty cash or employee
travel-related expenses). Government departments and
agencies are to reimburse third parties for PST paid in respect
of goods and services acquired by or on behalf of a department
which are either acquired by federal employees in the course of
employment-related travel (including transportation,
meals, accommodation, taxi services) or purchased from petty
cash.
(d) Departments shall not apply for any refund, rebate or
remission of any PST paid or PST reimbursed to third parties from
the respective provinces.
7.3 Payment of HST
(a) Departments will pay the HST on purchases of goods and
services in the name of Canada where the goods or services are
received in any participating province.
(b) Departments will NOT claim exemption from paying HST in
participating provinces on purchases of goods and services
in the name of Canada except where the goods or services are
received in a non-participating province.
(c) Departments receiving goods or services in a
non-participating province from a participating
province do not pay HST.
7.4 Other Ancillary Taxes
Departments will pay the ancillary taxes required by the
Reciprocal Taxation Agreements with all provinces and territories
as described in Appendices B and C for each province.
8. Procedural requirements
In those provinces which offer commissions to individual
vendors, and when cost-effective, registered federal
vendors must claim the amount of compensation provided for under
the respective provincial statutes on an individual basis.
9. Monitoring
(a) The Treasury Board Secretariat will monitor the
effectiveness of this policy by reviewing departmental audit and
performance monitoring reports.
(b) The collection and reporting of the provincial sales tax
will be subject to audit by provincial revenue departments in the
same manner as any other vendor.
(c) The collection and reporting of the HST will be subject to
audit by Revenue Canada in the same manner as any other
vendor.
(d) Departments are responsible for the effective and
efficient application of the RTA and CITCA to their
operations.
(e) Departments should undertake periodic reviews and audits
which focus on the accuracy and completeness of amounts of PST
and/or HST collected and paid in accordance with this policy and
the RTA and CITCA.
(f) Performance indicators should relate primarily to the
efficiency of documentation (policies, procedures and training
material) and systems used to determine the amount of PST and/or
HST charged and for the remittance of the PST to provincial tax
departments.
10. References
(a) Part VII of the Federal - Provincial Fiscal
Arrangements and Federal - Provincial Post - Secondary Education
and Health Contribution Act (1985 Revised Statutes).
(b) Part IX of the Excise Tax Act.
(c) Policy on the Application of the Goods and Services Tax
and Harmonized Sales Tax in the Departments and Agencies of the
Government of Canada, Comptrollership, Treasury Board
Secretariat publication.
Note: Treasury Board Secretariat publications are available in
electronic format only. They can be accessed through the TBS Web
site on the Government Enterprise Network (GENet), the federal
government internal network, at the following address:
http://publiservice.tbs-sct.gc.ca/
and on the TBS Web site on the Internet at:
http://www.tbs-sct.gc.ca/
11. Enquiries
(a) Enquiries about this policy should be directed to your
departmental headquarters.
(b) Enquiries from departmental headquarters about this policy
and about disputes resulting from tax adjustments or provincial
audit findings should be directed to:
Financial, Contract and Asset Management Sector
Deputy Comptroller General Branch
Treasury Board Secretariat
Ottawa, Ontario
K1A 0R5
Telephone: (613) 957-7233
Facsimile: (613) 952-9613
Email:
Internet: DCG-SCGInformation@tbs-sct.gc.ca
X400: c=ca; a=govmt.canada; p=gc+TBS.SCT;
s=DCG-SCGInformation
(c) Enquiries about provincial tax legislation should be
directed to the provincial tax office - see Appendix C for
addresses and telephone numbers.
(d) Enquiries about reciprocal taxation agreements, CITCA and
HST legislation should be directed to:
Project Director
Federal-Provincial Taxation Group
Tax Policy Branch
Department of Finance
Ottawa, Ontario
K1A 0G5
Telephone: (613) 943-1936
Facsimile: (613) 996-2690
Appendix A
Reciprocal Taxation Agreements, Comprehensive Integrated Tax
Coordination Agreements and Types of Provincial Taxes
The RTA and CITCA are complementary and both types of
agreements may run concurrently. As a result departments continue
to be required to pay ancillary taxes in participating
provinces (see 3.2 below).
1. Comprehensive Integrated Tax Coordination
Agreements
1.1
Participating Provinces
Canada has CITCA with the provinces of Newfoundland, Nova
Scotia and New Brunswick. See the Policy on the Application of
the Goods and Services Tax and Harmonized Sales Tax in the
Departments and Agencies of the Government of Canada,
Comptrollership, Treasury Board Secretariat publication, for the
appropriate accounting and other information related to the
HST.
1.2
Collection of HST
Federal departments in all provinces which sell taxable goods
and services to a recipient in a participating province
are required to collect and file appropriate returns for the
HST.
1.3
Payment of HST
Federal departments in all provinces must pay suppliers the
HST for taxable goods and services it receives in
participating provinces.
2. Reciprocal Taxation Agreements
2.1
Partaking provinces
(a) Canada has Reciprocal Taxation Agreements (RTA) with all
provinces and territories except Alberta and New Brunswick. The
RTA were renewed January 1, 1994 for a five year term.
(b) Canada is presently negotiating the renewal of reciprocal
taxation administrative arrangements with New Brunswick. Until
the arrangements are renewed, both governments will continue to
follow the terms of the agreements concluded in March 1991.
2.2
Collection of provincial sales taxes
Federal departments which sell taxable goods are required to
collect and remit provincial sales taxes in all provinces. The
collection of provincial taxes is required by all RTA except the
one with Yukon and the administrative arrangements with New
Brunswick. However, even in provinces without an agreement
covering the collection of taxes, it is the federal government
policy to collect and remit general sales and ancillary taxes.
Note, however, that the participating provinces do not
charge PST.
2.3
Payment of PST
Federal departments are exempt from paying general PST in all
provinces.
2.4
Other
(a) Federal departments are required to pay ancillary taxes in
ALL provinces except the NWT and Yukon. In Saskatchewan, federal
departments are exempt from fuel taxes. In Alberta, federal
departments do not pay ancillary taxes as there is no RTA.
(b) The RTA require federal departments to pay PST on third
party purchases in all provinces except Alberta (no RTA), the
NWT and Yukon (neither have general sales taxes, but the NWT's
RTA requires federal departments to pay, should the NWT levy one
in the future).
3. Types of provincial sales taxes
Provincial sales taxes include all taxes and fees levied by
the appropriate provincial and territorial governments and are
classified as follows.
3.1
General sales taxes
A general sales tax is considered to be a tax of general
application payable by the purchaser on the value of goods,
property or services acquired, and is levied under a provincial
retail sales tax statute or its equivalent. The HST is not
considered to be a provincial general sales tax.
3.2
Ancillary taxes
(a) An ancillary tax is a tax or fee generally levied under a
provincial statute other than the provincial retail sales tax
legislation or its equivalent.
(b) Purchases made in the NWT, Yukon and Alberta, and gasoline
purchased in Saskatchewan will be exempt from this type of
provincial sales tax upon presentation of the exemption
certificate.
(c) Ancillary taxes include fuel taxes, tobacco taxes,
admission/amusement tax (Nova Scotia), broadcast advertising tax
(Quebec), hotel room taxes (where these taxes are not levied
under the provincial retail sales tax legislation), as well as
general sales taxes applicable to insurance premiums in Quebec
and environmental levies on batteries and tires in British
Columbia.
Appendix B
Reciprocal Taxation Agreements - Requirements
1. General
The tax rate to be applied is based on the province where the
goods are to be delivered.
2. Exemption certificate
No general sales taxes are paid and the provincial sales tax
license number applicable to the particular provinces must appear
on all purchase documents at the time of the purchase made
directly on behalf of a department or agency.
3. Ancillary taxes
(a) Ancillary taxes are payable in those provinces where they
are applicable.
(b) Departments and agencies are responsible for paying
applicable ancillary taxes directly to suppliers. License numbers
should not be quoted unless the invoices include purchases which
are subject to PST. These payments are to be charged to
departmental appropriations.
(c) Payment of motor vehicle registration fees is required for
vehicles held by federal departments and agencies. Motor vehicle
registration fees are to be paid directly from departmental
appropriations.
4. Registration
(a) Federal departments and agencies which sell goods and
services to external parties (such as, employees, Crown
corporations or the public) are considered vendors by provincial
legislation and are required to apply for a vendor registration
certificate from the appropriate provincial authorities in
non-participating provinces.
(b) The department or agency shall contact the designated
provincial representatives for any non-participating
province in which the goods are expected to be delivered and
provide information on the nature of the sales (including the
goods and services being sold, potential clients) and the
estimated volume of sales in dollars. The province will determine
whether the department or agency is required to register as a
vendor. If registration is necessary, the province will issue a
vendor registration certificate and provide applicable
instructions, including tax information and due dates for
returns.
5. Accounting
(a) PST collected will be deposited in the Consolidated
Revenue Fund and credited to a PST liability account in the
Accounts of Canada at the time of receipt. A debit entry is to be
made to the PST liability account when the tax is remitted to the
appropriate province. Departments which have sales that are
taxable in provinces but which do not have a PST liability
account should request one from the Receiver General.
(b) Note that PST are normally remitted on an accrual basis.
However, in the case of credit sales, PST may have to be remitted
to the appropriate province before payments are received.
Therefore, the department PST liability account may have a
temporary debit balance.
6. Commissions
(a) As a form of compensation for the services of collecting
and remitting provincial sales taxes, most provinces offer
vendors a commission.
(b) When commissions are claimed by individual federal
vendors, the commission will be deducted from the remittance made
to the province. The amount of the commission will be debited
from the PST liability account and credited as non-tax
revenue, source object 4550, "Proceeds from Sales -
Other".
(c) Where a department has parliamentary authority to net
vote, the commission may be credited to source object 3550,
"Proceeds from Sales - Other".
7. Provincial review of departmental (vendor) sales
records
(a) Departments and agencies are responsible for maintaining
proper records on the taxability of their sales, and on the taxes
collected, remitted and owing, to permit verification by the
partaking provinces. These records may include sales
invoices, sales journals, cash register tapes, general ledgers,
daily sales reports, and records of goods acquired for sale.
(b) During a provincial audit, federal vendors are required to
provide provincial officials with access to their records and to
explain the procedures relating to their sales activities.
(c) Provincial audit will take place periodically as
considered necessary by the partaking provinces.
8. Non-compliance
When a provincial audit indicates that a department or agency
did not comply with provisions of the provincial tax legislation,
the province may recommend changes, where warranted, to correct
procedures in areas of non-compliance.
9. Tax adjustment
(a) Where a provincial audit finds that a federal vendor has
failed to collect or to remit tax, the province may request
payment of an adjustment. This adjustment represents the amount
of the tax which should have been collected and remitted by the
vendor, including interest where applicable.
(b) The department will review the documentation provided by
the province supporting the tax adjustment. Within ninety days of
receipt and upon agreement, payment will be made by the
department to the province.
(c) Tax adjustments are to be paid from departmental
appropriations and charged to object of expenditure 3259.
10. Taxes collected and not remitted
(a) When a provincial audit finds that certain provincial
taxes have been collected but not remitted, the province will
send the federal vendor a "Request for Payment of Tax
Adjustments".
(b) Departments will review the documentation furnished in
support of the tax adjustment and, if in agreement, will pay the
tax adjustment to the province. This adjustment will be paid out
of the PST Liability Account where the tax receipt is held.
11. Dispute resolution
(a) In cases where a federal vendor disagrees with the
findings of the provincial audit or with the resulting tax
adjustment, the matter will be referred to the Financial and
Contract Management Sector of the Deputy Comptroller General
Branch of the Treasury Board. Discussion will then take place
between officials of the Treasury Board and the province
concerned to resolve the difference administratively.
(b) If the dispute is not settled at this level, the matter
may be referred for decision by a Board of Commissioners in
accordance with the terms of the Federal-Provincial
Reciprocal Taxation Agreements.
Appendix C
Details of the Reciprocal Taxation Agreements and CITCA by
Province and Territory
1. Newfoundland
1.1
Participation
CITCA participating province and RTA partaking
province.
1.2
Contact office
Manager
Tax Information and Rulings
Tax Administration Branch
Department of Finance - Newfoundland
P.O. Box 8720
St. John's, Newfoundland
A1B 4K1
(709) 729-3831
1.3
Account number
32243-0-09
1.4
Harmonized sales tax
Federal departments are required to pay HST in Newfoundland.
Federal departments are also required to pay HST on third
party 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.
1.5
Ancillary taxes and other fees
Canada will pay ancillary taxes and other fees imposed under
the provincial sales tax legislation, as established for the
purposes of Part VII of the Federal - Provincial Fiscal
Arrangements and Federal Post - Secondary Education and Health
Contributions Act (1985 Revised Statutes) and levied or
collected under the following legislation as though such taxes
and fees were applicable to Canada:
- The Gasoline Tax, R.S.N., c. G-1, 1990
- The Highway Traffic Act, R.S.N., c. H-3,
1990
- The Tobacco Act, R.S.N., c. T-5, 1990
- The Motorized Snow Vehicles and All - Terrain Vehicles
Act, R.S.N., c. M-20, 1990.
2. Prince Edward Island
2.1
Participation
RTA partaking province.
2.2
Contact office
Chief Tax Administrator
Department of Provincial Treasury
Provincial Revenue
Province of Prince Edward Island
P.O. Box 1330
Charlottetown, PEI
C1A 7N1
(902) 368-4146
2.3
Account number
OP-10000-250
2.4
Provincial general sales tax
Federal departments are exempt from paying provincial general
sales tax in Prince Edward Island. However, federal departments
are required to pay general sales tax on third party
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.
2.5
Ancillary taxes and other fees
Canada will pay the taxes and other fees imposed under the
provincial sales tax legislation, as established for the purposes
of Part VII of the Federal - Provincial Fiscal Arrangements
and Federal Post - Secondary Education and Health Contributions
Act (1985 Revised Statutes) and levied or collected under the
following legislation as though such taxes and fees were
applicable to Canada:
- Health Tax Act, R.S. P.E.I., 1988, c. H-3
- Gasoline and Diesel Oil Tax Act, R.S. P.E.I., 1988,
c. G-3
- Motor Carrier Act, R.S. P.E.I., 1988, c.
M-10
- Highway Traffic Act, R.S. P.E.I., 1988, c.
H-5
2.6
Additional information
Federal departments are exempt from paying provincial general
sales tax where they have entered into an agreement for motor
fleet maintenance service for vehicles owned by Canada and where
the contractor has accepted the liability for payment to third
parties for goods and services to maintain the vehicles. Such
payments to third parties are deemed to be made by Canada, and,
as a result, are exempt from provincial sales tax at point of
purchase.
3. Nova Scotia
3.1
Participation
CITCA participating province and RTA partaking
province.
3.2
Contact Office
Manager
Tax Information and Vendor Services
Provincial Tax Commission
P.O. Box 755
Halifax, Nova Scotia
B3J 2V4
(902) 424-6317
3.3
Account number
U84-00-03172-3
3.4
Harmonized sales tax
Federal departments are required to pay HST in Nova Scotia.
Federal departments are also required to pay HST on third
party 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.
3.5
Ancillary taxes and other fees
Canada will pay the taxes and other fees imposed under the
provincial sales tax legislation, as established for the purposes
of Part VII of the Federal - Provincial Fiscal Arrangements
and Federal Post - Secondary Education and Health Contributions
Act (1985 Revised Statutes) and levied or collected under the
following legislation as though such taxes and fees were
applicable to Canada:
- Gasoline and Diesel Oil Tax Act, R.S. N.S., 1989, c.
183
- Motor Carrier Act, R.S. N.S., 1989, c. 292
- Motor Vehicle Act, R.S. N.S., 1989, c. 293
- Off Highways Vehicles Act, R.S. N.S., 1989, c.
323
- Theatres and Amusements Act, R.S. N.S., 1989, c.
466
- Tobacco Tax Act, R.S. N.S., 1989, c. 470
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