Online Sales - Manitoba RST changes effective December 1, 2021
Online Sales - Manitoba RST changes effective December 1, 2021
Vendors selling supplies or services on-line in Manitoba now must collect and report retail sales tax rules, whether they’re resident or not in the province.
The Manitoba government has followed the lead of the federal government and several other provinces in adding retail sales tax (RST) on supplies made by or through electronic platforms.
The intent of the new rules is to address a concern with sales tax leakage in e-commerce transactions. The application of the new rules is not restricted to businesses within Manitoba but also applies to businesses located outside of Manitoba selling goods or services for use, consumption or supply within Manitoba. Many vendors or service providers previously not subject to RST obligations may now be impacted.
The new rules for online transactions represent a significant change. Because many consumers were unaware they needed to self-report RST in these situations and because the taxing jurisdictions do not have the resources to audit and enforce RST collection at the consumer level, the changes shift RST collection and reporting responsibilities to the suppliers, regardless of whether the suppliers are resident in Manitoba.
As of December 1, 2021, many online platform operators are obligated to register for and collect the seven percent Manitoba RST when they transact with someone with ties to Manitoba. The new obligation applies to all taxable sales facilitated through their platform, regardless of whether they are resident in Manitoba.
Non-residents of Manitoba are now considered vendors for RST purposes when they make a retail sale in Manitoba. Prior to the changes, there was often no RST collected on sales by non-residents who were not registered for RST.
Online platform operators
The legislative changes impose an obligation to register for RST onto a person who operates an electronic online marketplace, or someone who operates the online platform and offers to sell taxable goods or services tied to consumption or use within Manitoba. The platform will be an “online seller” and will also be considered a vendor for RST purposes.
Where the platform operator handles the key elements of the transaction (for example, the sale and the payment), the platform operator is responsible for collecting and remitting the RST to Manitoba Finance.
Telecommunications and digital services
The new rules also expand and provide clarification on certain electronic transactions, extending RST to telecommunications services such as audio and video streaming-type services, as well as sales of other digital content.
Taxable services will now include sending, receiving, downloading, or viewing telecommunications through phones, tablets, computers, and similar devices. Furthermore, the amendments have expanded the category of telecommunication services to include audio programs, music, ring tones, video, and similar programs.
These changes are consistent with other taxing jurisdictions as governments continue to focus on ensuring e-commerce transactions are appropriately captured in their tax base.
Short-term accommodation – online bookings
Prior to the new rules, short-term accommodation was subject to RST, but the past legislation did not capture accommodation transacted though non-resident online platform providers that allow consumers to book from their website. The expanded RST registration requirements now include these online platform providers; they will now be considered a vendor and are obligated to collect RST on the supply (i.e., bookings as well as any related service fees).
The owner of the short-term accommodation property will not have to collect RST if they only use such platform operator(s) and do not make separate supplies themselves. However, if the property owner provides some short-term accommodation on their own, and / or use a platform operator, they must collect and remit on what they are supplying directly to their customers. The platform operator would remit what they collect as applicable.
There are some exemptions for accommodations:
- long-term rentals of more than one month
- non-profit organizations or registered charities providing lodging as part of a recreational program for those under 18 years and / or for underprivileged or disabled persons
- those that have fewer than four rooms with sleeping accommodations, but only if the accommodations cannot be purchased through an online platform
Leasing vehicles online
There is an exception for leases of motor vehicles obtained through an online operator: the online operator is not required to remit tax on the leased vehicle, or on any taxable service or insurance contract related to the lease if the online seller remits the tax. This is not consistent with the expected application for other types of supplies where the online platform operator would be required to collect and remit the RST.
Other exemptions added – December 1, 2021
Personal services (whether sold online or in person) being exempted include:
- hair services
- non-medical skin care aesthetician services
- body modification services and spa services
Note: Rules on tanning services (which were all previously subject to RST) have been amended such that only “a tanning service that uses a device to produce ultraviolet radiation” would be taxable. Presumably, other types of tanning services are now considered exempt services.
What does all this mean?
For businesses involved in e-commerce, the changes to the Manitoba RST represent an additional registration and tax collection obligation; however, this is consistent to similar rules being employed in many other tax jurisdictions. Businesses that operate in multiple jurisdictions should be aware of potential exposure to uncollected sales tax and unfiled returns.
As indirect taxes become more complex, it is becoming increasingly challenging for businesses to stay on top of their compliance obligations. Having regular discussions with a business advisor on where you do business and how you conduct that business can help identify and address potential issues. Involving an indirect tax specialist periodically to confirm your RST collection and reporting requirements can help keep your business compliant.
Contact us
For more information on indirect taxes and their impact on your business, contact:
Danny Crawford
Partner – Edmonton
[email protected]
780.969.1426
Jeff Harrison
Partner – Regina
[email protected]
306.751.7998
Patty Hnidy
Senior Manager – Saskatoon
[email protected]
306.664.8319
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