On July 1, 2010, Ontario introduced a Harmonized Sales Tax (HST) - the provincial portion is eight per cent and the federal portion is five per cent, for a combined HST rate of 13 per cent.

“Under the HST, some items are subject to additional tax, while others are exempt or not charged the full 13 per cent,” says Chartered Accountant Doug Robinson of Orangeville.

“For many purchases there has been no impact at all. Transition payments, tax credits and other measures have also been introduced to ease the transition to the HST.”

Here is some specific information from Mr. Robinson on how the HST might affect you:

Understand what is subject to additional tax – Under the HST, services such as telecommunications, real estate fees and legal and accounting fees are subject to additional tax. The HST also applies to new home purchases, although you may be eligible for a rebate of up to $24,000 for a portion of the HST paid.

Know what is exempt from the HST – Basic groceries, prescription drugs, some medical devices, municipal public transit, health and education services, legal aid, most financial services, child care, tutoring, music lessons and residential rents are exempt from the HST.

Be aware of point-of-sale rebates - Children’s clothing and footwear under $30, children’s car seats and booster seats, diapers, feminine hygiene products, books (including audio books), printed newspapers and prepared food products sold for $4 or less will only be charged the five per cent federal portion of the HST, not the full 13 per cent. The rebate for the provincial portion of the HST will be provided at the point of sale.

Take advantage of measures to ease the transition – The provincial government is providing three HST transition payments – one passed in June 2010, with two more to come - December 2010 and June 2011. The payments total $1,000 for families with annual income under $160,000 or $300 for individuals over age 18 with annual income under $80,000. To receive these payments, you must file tax returns for 2009 and 2010. Low-income Ontarians will be eligible for a sales tax credit of up to $260, which can be obtained by filing a tax return. As well, Ontario tax on the first $36,848 of income was reduced from 6.05 per cent to 5.05 per cent, effective January 1, 2010.

Ultimately, there are two simple, yet important, things you can do for yourself when it comes to the HST - control your spending and file your tax returns each year.

Brought to you by the Institute of Chartered Accountants of Ontario