Voice of Business: Navigating the Holiday Tax Break

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This past month has been challenging for businesses and organizations across Canada.

With postal strikes affecting businesses across Ontario, we’re diving into some news that could shake up our holidays for businesses and shoppers across Canada. Starting this Saturday, December 14th, 2024, the government is rolling out a GST/HST tax exemption on various products until February 15th, 2025.

The GST/HST offers zero rate taxes on multiple products. The following products are:

  • Food

  • Beverages

  • Restaurants, catering, and other food or drink establishments

  • Children’s Clothing and Footwear

  • Children’s diapers

  • Children’s car seats

  • Children’s Toys

  • Jigsaw Puzzles

  • Video Game consoles

  • Physical Books

  • Printed Newspapers

  • Christmas and Similar decorative trees

Now, this may seem like a win for consumers. No tax means lower prices and we could see increased spending, but we don’t know the whole impact on businesses and how this pressure to comply with new tax rules takes its toll at a time when shipping is delayed from ongoing postal strikes. While customers might enjoy the savings of an estimated total of $1.7 billion, businesses are stressed and scrambling to get ready. According to the Canadian Federation of Independent Business (CFIB), many small businesses call this tax break a headache. A survey from 3,500 small businesses found that 75 per cent of small firms expect it’ll cost them about $1,000 just to reprogram their systems to handle the exemption. And 65% said there’s not enough time to get everything in place before the deadline.

With the perceived benefit for consumers, businesses will still have to go through the tedious task of updating their systems. This tedious task could update their computing systems to apply zero-tax to the products listed above.

Some industries, such as hospitality, will have to go through more tedious tasks than others. This involves distinguishing between selecting the alcohol eligible for GST/HST relief because there are specific alcoholic beverages eligible for tax relief and some that are not. According to the CRA, beer and malt beverages (canned or bottled beer, pitches of beer) qualify. Wine, cider and sake (including fortified) that are 22.9 per cent alcohol by volume or less. And/or Spirit cooler and premixed alcoholic beverages that are 7 per cent ABV or less also qualify.

The items that would not qualify are alcoholic spirits and liqueurs, including cocktails with spirits that would not qualify. For example, a sangria, including wine and rum, would not qualify. Beverages sold from a vending machine also are not eligible. Examples like these create an additional burden for businesses. Another burden is that businesses will additionally have to revert to their original systems after the tax relief period.

There are also some confusing rules around returns. For instance, a customer buys something now during the tax break, then returns it and repurchases it later. That could mean extra fees for businesses handling those transactions through credit cards. And let’s not forget some of the confusion around qualifying items—like age limits for children’s products. Businesses will need to sort through these nuances, which could lead to even more confusion. This is not ideal for already stretched small businesses preparing for the busy holidays.

While the government hopes this holiday tax break will boost consumer spending, not everyone is convinced. Only 4 per cent of small business owners surveyed by the CFIB think it’ll lead to stronger sales. For many, the costs and logistical challenges seem to outweigh the potential benefits. As Saturday looms closer, this GST/HST relief is inevitable. Still, we can only hope this holiday relief will increase sales for our local businesses and make the tedious work worth doing.

If you’re a business owner feeling overwhelmed, there are resources to help you navigate this. You can call the CRA’s GST/HST inquiries line (1-800-959-8287 for English, 1-800-959-8296 for French) or check out the CRA’s webpage here.

Content provided by the Peterborough and the Kawarthas Chamber of Commerce.

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