On April 16, 2013, Finance Minister Stan Struthers presented the 2013 Manitoba budget. For the fiscal year 2013-2014, it is expected that the province’s spending will increase by 3.1 percent, with revenues expected to rise only 3 percent. As a result, Manitoba is forecasting a deficit of $518 million for this fiscal year. In addition, the province’s deficit for fiscal 2012-2013 has been revised and is projected to hit $583 million. This is $16 million more than projected in December 2012.
Manitoba has announced a number of significant tax changes in this year’s budget, which have been summarized below.
Retail Sales Tax
Rate Increases
To assist in funding its infrastructure, effective July 1, 2013, the province will increase its retail sales tax rates for a period of ten years, ending on June 30, 2023.
The most significant impact on consumers will be a 1 percent increase in the general retail sales tax rate, from 7 percent to 8 percent. The province will also increase the sales tax rate on mobile, modular and ready-to-move homes from 4 percent to 4.5 percent. The reduced sales tax rate for electricity used by qualifying manufacturers, mining companies and oil well operators will also be increased, from 1.4 percent to 1.6 percent.
The prorate vehicle tax (“PVT”) rates will also be increased for registration periods beginning on or after July 1, 2013. After June 30, 2023, these rates are expected to return to their current levels. Please see Manitoba Information Notice RST 13-04, “Prorate Vehicle Tax Rates”, which outlines both sets of rates.
The province has indicated that the reduced sales tax rate for home heating, heating and cooling farm buildings, and operating farm grain dryers will remain unchanged at 1.4 percent.
Transitional Rules
To assist with these provincial sales tax rate changes, Manitoba Finance has issued guidance on the transitional rules to be used to determine the correct rate of tax to apply to certain transactions.
Taxable Goods
The transitional rule for goods is based on when a taxable purchase is made. Goods purchased before July 1, 2013, including credit purchases and deferred payment arrangements, and goods fully paid for, but scheduled for delivery after June 30, 2013, will be subject to 7 percent retail sales tax. The 8 percent sales tax rate will apply to goods acquired on or after July 1, 2013, including any goods for which a deposit may have been paid prior to July 1, 2013. The rate increase for sales of mobile, modular and ready to move homes will be treated in a similar manner.
Taxable Services
The transitional rule for services, other than telecommunications services, is based on when the service is performed, rather than when payment is made or becomes due. Therefore, services completed before July 1, 2013 will be subject to 7 percent retail sales tax, and 8 percent sales tax will apply to services provided on or after that date.
Under the transitional rules, prepaid service contracts purchased and paid for prior to April 17, 2013 will be subject to tax at the current rate (i.e., 7 percent), regardless of when the service is actually performed. However, where a prepaid service contract, such as a periodic maintenance contract, is acquired after April 16, 2013, and the period of service includes a day that is prior to July 1, 2013, sales tax will apply at a rate of 7 percent. Where the service is to be performed entirely after June 30, 2013, sales tax will apply at 8 percent.
Similarly, where prepaid services, such as spa packages, are purchased and paid for from April 17, 2013 to June 30, 2013, and the package may be redeemed during a period that includes any date prior to July 1, 2013, the full package will be taxable at 7 percent. Prepaid service packages that may only be redeemed after June 30, 2013, however, will be subject to tax at the new rate of 8 percent.
Tax on services that straddle the July 1, 2013 date will apply based on when the services are, or will be, performed. The existing 7 percent rate will apply to the portion of the service performed before July 1, 2013, and the 8 percent rate will apply to the portion of service performed on or after July 1, 2013. Similar rules apply for services that are billed by the hour, day or other periodic measure after the services have been performed, requiring the charges to be segregated between the old and new tax rates.
Manitoba Information Notice RST 13-05, “Retail Sales Tax Rate Change – Transitional Rules”, provides additional guidance on the transitional rules, including specific rules for supplies of:
- utilities (including telecommunication services);
- leased goods;
- insurance; and
- real property contracts.
New Exemptions
Baby Supplies
Effective July 1, 2013, retail sales tax will no longer apply to certain baby supplies, including items designed specifically for use with a child under the age of 24 months. The province’s new Information Bulletin No. 055, “Baby Supplies”, provides a detailed list of exempt items, including: nursing and feeding supplies; safety items; strollers and carriers; bathing and grooming supplies; and baby furniture and other accessories. Diapering and toilet training supplies, as well as all-inclusive charges for diaper services, will also be exempt, regardless of the child’s age.
Note that children’s toys, baby lotions and creams (excluding diaper powders and creams), as well as most items used primarily by a parent or caregiver, will remain taxable.
Safety Equipment
In an effort to improve safety measures in the province, child safety restraint systems, including car seats and booster seats, used in vehicles will be exempt from retail sales tax, effective July 1, 2013. In addition, bicycle helmets acquired for use by persons of all ages will be exempt.
Purchases by Municipalities
The current sales tax exemption for sand/salt mixtures acquired by municipalities for use in flood related activities will be expanded to include any municipal works. This change is effective July 1, 2013.
Tobacco Tax
Effective midnight April 16, 2013, tobacco tax rates were increased by 4 cents, bringing the current rates to: 29 cents per cigarette; 28 cents per gram of fine-cut tobacco; and 26.5 cents per gram of raw leaf tobacco. The tax rate on cigars will remain at 75% of the retail price, to a maximum of $5.00 per cigar.
Fuel Tax
In order to reduce red tape and administrative costs, the province will eliminate the requirement for certain fuel retailers to register and hold a fuel tax licence. This change only applies to fuel dealers who sell fuel at retail. It does not apply to fuel tax collectors and vendors of marked fuel. Those impacted by this change will be notified by the province.
Similar to the current 14 cents per litre tax on diesel fuel, the province has decided to introduce a tax on natural gas used in motor vehicles. This new tax, equal to 10 cents per cubic metre, will be phased in over a three-year period, beginning on April 17, 2013. The tax rate will be 3 cents per cubic metre from April 17, 2013 to March 31, 2014; 6 cents per cubic metre from April 1, 2014 to March 31, 2015; and then 10 cents per cubic metre as of April 1, 2015.
Further details on the 2013 Manitoba budget are available on the province’s web site at:
2013 Manitoba Budget.