Ryan Tax Review

From the Ryan TaxDirect™ Line...

Our Client Support Services Team typically receives over 5,000 calls each year on the Ryan TaxDirect™ line.

During its 2019 budget, Manitoba announced that it plans to reduce the Retail Sales Tax (PST) rate to 7% from 8%, effective July 1, 2019. Ryan reminds clients that it is important to plan how their accounting systems will handle the new rate during the transition period. Here is a typical question that we receive about sales tax rate changes.

Manitoba PST – Rate Change Transitional Rules

Question: I was told that there will be a change to the Manitoba PST rate in July. Is this true? Can you tell me how to determine if the new PST rate applies to a particular transaction?

Answer: Yes, the Manitoba PST rate will decrease from 8% to 7%, effective July 1, 2019. As with any sales tax change, transitional rules to determine the proper tax treatment of transactions occurring around the effective date were announced by the province. The general transitional rule for goods is based on when the taxable purchase is made. Goods purchased before July 1, 2019, including credit purchases and deferred payment arrangements, as well as goods fully paid for, but scheduled for delivery on or after July 1, 2019, will be subject to the 8% PST. The 7% PST rate will apply to any goods acquired on or after July 1, 2019, including goods for which a deposit may have been paid prior to that date.

For services (other than telecommunication services), the general transitional rule is based on when the service is performed, rather than when payment is made or becomes due. Therefore, services completed before July 1, 2019, will be subject to the 8% PST, and the 7% rate will apply to services provided on or after that date. Tax on services that straddle July 1 will apply based on the portion of the service that is performed before and on or after that date. As a result, the current 8% rate will generally apply to the portion of the service performed before July 1, 2019, and the 7% rate will apply to any portion of the service performed on or after that date. In such cases, it may be necessary for vendors to segregate the charges on the billing for services that straddle the transition date.

Specific rules have also been put in place for leased goods, holdbacks, prepaid contracts, utilities (including telecommunications), insurance and real property contracts. For more information, please refer to Manitoba Information Notice RST 19-01, “Rate Reduction Transition Rules”.

Have a different question? Call the Ryan TaxDirect™ line at 1.800.667.1600 or visit: ryan.com/Canada/ryan-taxdirect/