Cleaning the Clutter - Manitoba Retail Sales Tax

There’s something for almost everyone conducting business in Manitoba following changes to the provincial retail sales tax (RST).

Almost nine months in the making, The Budget Implementation and Tax Statutes Amended Act, 2020 received Royal Assent on November 6, 2020. While the 2020 Manitoba budget tabled in March did not introduce any new RST changes, it proposed an RST rate decline set to launch July 1, 2020, and a $25-per-tonne Green Levy.

Neither proceeded as the provincial government grappled with the economic fallout of the global pandemic. 

Refunds and Exemptions

When you read through the many housekeeping changes included in the Act, you will find there is something for almost everyone in how the RST affected their operations, or purchases. Keep in mind the changes came into effect November 6, 2020 and are not retroactive, except in select cases. Any tax planning or opportunities will need to be reviewed with caution. 

Farming

All-terrain vehicles and utility vehicles bought for use in farming are now eligible for RST refunds. This will include mini, dirt, or trail bikes, snowmobiles, all-terrain vehicles, and utility vehicles. 

Closely Related Parties

The exemption on RST-paid assets is extended to include transfers between two closely related corporations in certain instances where shares of the corporations are owned by spouses or common law partners. This is also similarly extended in respect of an interest in a partnership. This may be beneficial on some asset transfers in obtaining an exemption on RST-paid assets.

Early payment discounts / late penalties

The amended Act clarified that neither early payment discounts nor late penalties affect the sale price (upon which the RST is charged and collected) of the good or service supplied. This is similar to the application for GST / HST and QST, where an incentive to pay early or a penalty for paying late does not change the price of the supply or the tax payable. This is not an immediate discount at the time of sale, or a subsequent price adjustment.

Interjurisdictional vehicles – credit for RST paid

A credit of RST paid on the purchase of a vehicle registered outside of Manitoba for interjurisdictional purposes is now available. The credit rests on the vehicle being registered within five years after its purchase date, and the person who previously paid tax on the purchase price of the vehicle not being previously refunded.

This is to reflect interjurisdictional vehicles are not subject to RST (or RST in other provinces) when they are registered to reflect tax under this type of program.

Precious metals

Where precious metals (pure gold, silver or platinum) are acquired for investment purposes, they will be exempt of RST. However, the purchase of these metals for non-investment purposes will continue to attract RST. For example, you will pay RST when buying a gold necklace or a silver tea set. But if you acquire gold bars to hold for investment purposes, the RST is exempt.

Machinery, equipment, apparatus – broader exemption

The exemption on these types of property has expanded from when they are sold as part of a manufacturing plant to when those items are sold as part of a processing plant. The RST would have been paid on the initial purchase of these items. When they are sold as part of the building sale, they are essentially treated as part of the realty. However, if the equipment is sold separate from the building, the RST would apply.

The change is also considering more than one vendor when closely related to each other supplying to one purchaser. This appears to understand that certain assets may be held in one corporation with other assets being held in another, and collectively operate as that type of business.

Aircraft

The amended act clarified that a refund of RST on the sale of a taxable aircraft sold within six months of its purchase does not apply to a multijurisdictional aircraft on which prorated RST was paid. This refund is intended to be available for non-commercial aircraft used exclusively in Manitoba that are acquired and resold within six months of purchase.

Vehicles / aircraft

Also clarified in the amended act is that a refund is available for a person who buys or leases a vehicle (or aircraft) and sells a used vehicle (or aircraft) within six months. The refund does not become payable until the amount of tax paid under the lease equals the amount of the refund. This is considered in the case of a leased vehicle or aircraft is traded in for another vehicle or aircraft.

Non-Canadian resident refunds no longer available

The RST will no longer be refunded for goods taken out of Canada by non-residents. This situation exists where the customer removes the goods from Manitoba. RST is applied because the supply was considered made in Manitoba. A refund was available upon proof it left Manitoba. This is no longer eligible for a refund.

For more information, contact Jeff Harrison at 306.751.7998 or [email protected].