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Governments release additional guidelines for tax-inclusive pricing under Harmonized Sales Tax

The governments of Canada, Nova Scotia, New Brunswick and Newfoundland and Labrador today released additional guidelines for tax- inclusive pricing under the Harmonized Sales Tax (HST).

Tax-inclusive pricing responds directly to the strong preference expressed by Canadians to know the full price of goods and services in advance of their purchase. With tax-inclusive pricing, consumers in the participating provinces will know before they get to the cash register what their intended purchases will actually cost.

In developing the guidelines, the participating governments benefited from extensive consultations with businesses and business associations. As a result, the guidelines provide flexibility to ensure that registered businesses can comply with tax-inclusive pricing without undue cost. The participating governments will continue to work with businesses in implementing tax-inclusive pricing and in developing guidelines respecting price advertising within the participating provinces.

Following are the guidelines for tax-inclusive pricing released by the participating governments.

     Contact:

     Bill Bennett
     Finance Ottawa                News release also available on
     (613) 943-0747                Internet at //www.fin.gc.ca/

     Bruce Cameron
     Finance Nova Scotia           News release also available on
     (902) 424-8787                Internet //www.gov.ns.ca/fina/
     
     Pat Steeves
     Finance New Brunswick         News release also available on
     (506) 453-6916                Internet at //www.gov.nb.ca/
     
     Terry Paddon
     Finance 
     Newfoundland and Labrador     News release also available on
     (709) 729-6847                Internet at /

_____________________________

Tax-Inclusive Pricing:
Supplementary Information

INTRODUCTION

As detailed in the October 23, 1996 Technical Paper on the Harmonized Sales Tax (HST) issued jointly by the governments of Canada, New Brunswick, Nova Scotia and Newfoundland and Labrador, vendors in the participating provinces will be required under the HST to price goods and services sold to consumers on a tax-inclusive basis. To ensure that consumers remain aware of the amount of sales tax paid on each and every purchase, receipts and invoices will continue to display either the amount of tax paid or the rate at which sales tax is applicable.

Discussions between governments and retailers concerning price advertising within the participating provinces are ongoing, with the objective of putting forward a proposal shortly.

Tax-inclusive pricing responds directly to the strong preference expressed by Canadians to know the full price of goods and services in advance of their purchases. With tax-inclusive pricing, consumers will know before they get to the cash register how much their intended purchases will actually cost.

Federal and participating provincial government entities such as departments, agencies, commissions and Crown corporations will also be required to price and advertise goods and services sold to consumers on an HST-inclusive basis in the participating provinces and a GST-inclusive basis in the non-participating provinces.

Similarly, certain industries under federal jurisdiction � the passenger transportation industry, telecommunications and the banking sector � will be required to price and advertise services sold to consumers on an HST-inclusive basis in the participating provinces and on a GST-inclusive basis in the non-participating provinces.

In addition, certain areas under the direct responsibility of the participating provinces, including municipalities and related organizations will be required to comply with tax-inclusive pricing. These rules will also apply to the sale of certain products.

Tax-inclusive pricing will be effective as of April 7, 1997. Full monitoring of compliance will not be available until August 1, 1997. In the meanwhile, all efforts will be undertaken to ensure that businesses are endeavouring to comply with the tax-inclusive pricing requirements.

Together with the details in the October 23 Technical Paper (e.g., on cash register receipts), this document provides information about the application of tax-inclusive pricing to various goods and services. A section on commonly asked questions about tax-inclusive pricing is also included.

GUIDELINES

General Tax-Inclusive Pricing Rule
In-Store Pricing

In the participating provinces, all price information displayed in-store (e.g., price tags, shelf labels, menus) must be on a tax-inclusive basis.

Vendors in the participating provinces will have four options for complying with the tax-inclusive pricing requirements. Goods and services may be:

• priced on a tax-inclusive basis only - either by way of pre-pricing by the manufacturer or stickering by the vendor;

  dual-priced - with the tax-inclusive price displayed alongside the tax-exclusive price (the tax-inclusive price must be at least the same size as the tax-excluded price);

  shelf- or bin-priced - with the tax-inclusive price indicated on the shelf or bin in direct proximity to the goods to which it pertains and with the option that goods remain individually priced with the tax-exclusive price only (if vendors use dual prices on shelf or bin labels, the tax-inclusive price must be at least the same size as the tax-excluded price); or

  priced by signage - for pre-priced magazines, greeting cards and seed packages, consumers may be informed of the tax-inclusive prices through conversion charts in immediate proximity to the products which list the tax-inclusive price at each applicable tax-exclusive price point (this rule will be reviewed after the first year of tax-inclusive pricing). The tax-inclusive prices on conversion charts must be at least the same size as the tax-excluded prices.

The tax-inclusive price must be identified in a clear manner.

• - Several options are acceptable provided that the information is understandable and accurate. Examples include:

  - $1.99 HST inclusive
  - $1.99 HST incl.
  - $1.99 Sales-tax inclusive

NATIONAL CATALOGUES

As specified in the October 23 Technical Paper, national catalogues distributed in participating provinces will not be required to display prices on a tax-included basis. They will, however, be required to use explicit disclaimers on the cover page and on every second page thereafter, clearly indicating that taxes are not included in prices advertised.

Furthermore, with respect to national catalogues advertising a telephone number (e.g., a 1-800 number) for orders of goods and services, full prices including tax will have to be disclosed at the time of ordering. Catalogues must also indicate that consumers can obtain full price disclosure by calling that number.

Where a customer orders by mail or fax, catalogues will also be required to have a space on order forms for the calculation of the HST, if applicable.

Definition
A national catalogue will be defined as "a publication:

• a. that lists, enumerates, describes or depicts names, titles, persons, things, properties or services, or any combination thereof, with or without explanatory or descriptive remarks;
  b. that is designed primarily to promote the sale of the properties or services listed, enumerated, described or depicted;
  c. that advertises properties or services at the same price across the country;
  d. within which less than 50 per cent of the properties and services listed, enumerated, described or depicted are advertised at a reduced sale price or at a discounted price;
  e. that includes price information that will be in effect for more than two months after the initial distribution of the publication;
  f. that has bound printed sheets; and
  g. that is distributed both inside and outside participating provinces with less than 10 per cent of the total number of copies of the publication distributed within participating provinces."

To be considered a national catalogue, a publication must meet all the criteria of the definition.

Coming-Into-Force Rule
Tax-inclusive pricing requirements will apply to any national catalogue printed after February 28, 1997 for which prices are in effect after April 6, 1997.

Disclaimer Required
The disclaimer that must be added on the cover and on every second page thereafter of a national catalogue must be clear.

Several options are acceptable provided that the information given to consumers is understandable and accurate. Examples include:

• - Prices do not include sales tax
  - Taxes are not included in prices
  

The disclaimers should be no less than 1/32 of the page size.

POSTAGE STAMPS
The requirements for tax-inclusive pricing will apply to pre-priced booklets of stamps and other postal products.

The face value indicated on individual stamps will remain unchanged. However, prominent signage will have to be displayed in Canada Post outlets and franchises indicating the tax-inclusive price of postage stamps.

BUSINESS-TO-BUSINESS SALES
Tax-inclusive pricing aims to ensure that consumers are better informed before they make purchasing decisions and, as such, the pricing requirement is mainly directed to all businesses making or offering sales at the retail level. Therefore, sales or price advertising by wholesalers, manufacturers, distributors and other businesses that sell 100 per cent of their goods or services to other businesses will not be subject to the tax-in pricing requirements.

BOOKS
The general tax-inclusive rule for individually priced goods will also apply to books. Since a rebate of the provincial component of the tax will apply to books, retailers need only include the federal component of the tax (7 per cent) in the price of books sold in participating provinces.

AUCTIONEERS
Auctioneers can comply with the tax-inclusive pricing requirements by using signage and by informing auction participants at the time of bidder registration that starting prices and prices bid do not include sales tax (where applicable) and that sales tax will be added to all final bids.

ZERO-RATED PRESCRIPTION GOODS
In circumstances where a good or a service is sold all or substantially all of the time (90 per cent or more) under a medical prescription, vendors will not be required to display a tax-inclusive price.

• Example:
  An optician operates a retail outlet that sells frames for
  eyeglasses. Ninety per cent or more of the frames are sold on a
  tax-free basis for prescription lenses. The optician will not be
  required to display the prices of frames on a tax-included basis.

  
  SUPPLIES MADE ON INDIAN RESERVES
  

• Where all or substantially all of the supplies made by a business are made or delivered on a reserve to Indians as defined in the Indian Act in circumstances where the good or service is not subject to tax, the business will not have to comply with the tax-inclusive pricing requirements.

  
  IDENTIFICATION OF THE HST ON RECEIPTS
  

• Vendors must refer to the amount or rate of tax on receipts or invoices in a clear way.
• Several options are available provided the information to consumers is clear and understandable. Examples include:

  - HST $0.30
  - HST at 15%
  - GST/HST $0.30
  - Sales Tax at 15%

  
  FEDERAL AND PROVINCIAL GOVERNMENT ENTITIES
  

• In participating and non-participating provinces, federal government entities will be required to have all price information with respect to properties or services displayed in-store and through advertising (e.g., price tags, shelf labels, written and electronic advertising) on a tax-inclusive basis.
• In participating provinces, provincial government entities will be required to have all price information with respect to properties or services displayed in-store and through advertising (e.g., price tags, shelf labels, written and electronic advertising, radio, flyers, billboards) on a tax-inclusive basis. Federal entities include departments, agencies, commissions and Crown corporations. They will be required to implement tax-inclusive pricing nationally as of April 7, 1997.
• Provincial entities include departments, provincial corporations and other bodies (e.g., provincial parks and museums). They will be required to implement tax-inclusive pricing as of April 7, 1997.

  
  INDUSTRIES UNDER FEDERAL JURISDICTION
  

• In participating and non-participating provinces, industries under federal jurisdiction such as suppliers of passenger transportation services and the telecommunications and banking industries will be required to have all price information with respect to services displayed in-store and through advertising (e.g., price tags, shelf labels, written and electronic advertising) on a tax-inclusive basis.
• Industries under federal jurisdiction will be required to implement tax-inclusive pricing nationally as of April 7, 1997.

  Passenger Transportation
  

• The price information in respect of passenger transportation services must be on an HST-inclusive basis when displayed or advertised in participating provinces and on a GST-inclusive basis in non-participating provinces. The Air Transportation Tax must also be included when air fares are displayed either in-store or through advertising.
• Supplies of passenger transportation services include air, rail and interprovincial bus transportation.

  Telecommunications Industry
  

• The price information in respect of the telecommunications services that telecommunications carriers provide to consumers must be displayed either in-store or through advertising on an HST-inclusive basis in participating provinces and on a GST-inclusive basis in non-participating provinces.
• For the purposes of tax-inclusive pricing, telecommunications carriers include telephone and cellular companies, television and radio stations, speciality television channels and cablevision carriers.
• Where certain telecommunications carriers provide a mixture of properties and services for an all-inclusive price, such as a fee for the rental of a cellular telephone which includes air time, the price information of that fee will be required to be on a tax-inclusive basis.

  Banking Industry
  

• Banks subject to the Bank Act will be required to display either in-bank or through advertising the tax-inclusive price on the taxable services they provide to consumers. Therefore, the price information with respect to such services must be on an HST-inclusive basis in participating provinces and GST-inclusive in non-participating provinces.

  
  AREAS UNDER PROVINCIAL JURISDICTION
  

• As of April 7, 1997, certain areas under the direct responsibility of the participating provinces including municipalities and related organizations will be required to comply with tax-inclusive pricing. These rules will also apply to the sale of certain products.

  ________________________
  

  Questions and Answers

  Pre-Priced Goods
  Q.   businesses be required to re-sticker all pre-priced goods to show tax-inclusive prices?

  A.   governments have developed rules that will minimize disruptions for businesses.

  • For example, some businesses have expressed concern about the cost of re-stickering pre-priced inventory with tax-inclusive prices.

    Accordingly, vendors of pre-priced goods in participating provinces will have some flexibility for complying with the tax-inclusive pricing requirements.

    Where manufacturers pre-price or -ticket a good that is distributed nationally at an identical price across Canada, that good can be pre-priced or -ticketed by the manufacturer with the tax-out price only, but shelf- or bin-priced in accordance with the general tax-inclusive pricing requirements.

    A business may also want to price on a tax-inclusive basis only � either by way of pre-pricing by the manufacturer or stickering by the vendor.

    Shelf- and bin-pricing of pre-priced items are low-cost options that many vendors can use to inform consumers of the total prices they will pay for their purchases without the need to re-sticker their inventories.

    As a result of this flexible option, there will be minimal re-stickering required for goods offered for sale by merchants in the participating provinces.

  
  Books
  Q. What are the tax-inclusive pricing requirements for books?

  A. A point-of-sale rebate of the provincial component of the HST is available in the three participating Atlantic provinces. Therefore, to comply with tax-inclusive pricing, book publishers need to indicate only the GST-inclusive price of books.

  • If they wish, publishers can simply add the GST-included price alongside other prices on book covers across the country.

    If publishers do not include the GST in cover prices, individual retailers in participating provinces could re-sticker or rely on shelf or bin price signs.

  
  Magazines
  Q. How will the tax-inclusive pricing requirements be applied to magazines?

  A. Participating governments appreciate that magazines are different than other pre-priced goods due to their time-sensitive nature, as well as the high-volume and rapid turnover of these products.

  • Many magazines are printed and distributed within two to three days and, in some cases, remain current for only two to four days after reaching the retailer.

    As such, the time required to re-sticker individual magazines that have been pre-priced on a tax-exclusive basis by the publisher would erode the limited sales window for retailers.

    Four options will be available to vendors of magazines within the participating provinces to facilitate compliance with the tax-inclusive pricing requirements:
    <- priced on a tax-inclusive basis only � either by way of pre-pricing by the publisher or stickering by the vendor;
    - dual-priced � the tax-inclusive price displayed (e.g., sticker or printed) alongside the tax-exclusive price;
    - shelf-priced � tax-inclusive price is posted on the shelf directly below the magazines to which it pertains; or
    - priced by signage � conversion charts in immediate proximity to the magazines for sale which list the tax-inclusive price at each applicable tax-exclusive price point.
    

  The effectiveness of the pricing practice through signage will be reviewed within one year.

  
  Greeting Cards
  Q. How will the tax-inclusive pricing requirements apply to greeting cards?

  A. Four options will be available to vendors of greeting cards within the participating provinces to facilitate compliance with the tax-inclusive pricing requirements:

  • - priced on a tax-inclusive basis only � either by way of pre-pricing by the manufacturer or stickering by the vendor;
    - dual-priced � the tax-inclusive price displayed (e.g., sticker or printed) alongside the tax-exclusive price;
    - shelf-priced � greeting cards, including those which are pre-priced on a tax-exclusive basis by the manufacturer, can be shelf-priced with the tax-inclusive price; or
    - priced by signage � conversion charts in immediate proximity to the greeting cards for sale which list the tax-inclusive price at each applicable tax-exclusive price point.

    The effectiveness of the pricing practice through signage will be reviewed within one year.

    The use of conversion charts in this context is appropriate given that manufacturers often accept the return of unsold cards from retailers � cards they may be unable to redistribute to retailers in non-participating provinces given that removing stickers could possibly mar the cards' aesthetic appeal and thereby reduce their value or even render them non-saleable.

    
    Business-to-Business Sales
    Q. Are businesses that sell properties or services to other businesses at the wholesale level rather than to consumers required to comply with the tax-inclusive requirements?

    A. Businesses that sell 100 per cent of their goods or services to other businesses will not be required to comply with the tax-inclusive requirements.

    
    Cash Registers
    Q. Will businesses be required to replace their cash registers to comply with tax-inclusive pricing?

    A. Existing cash registers and point-of-sale systems will be able to accommodate the new pricing requirements and will require only minimal reprogramming. As is currently the case, receipts will still have to show either the amount of tax paid or the rate of the applied tax.

    
    Penalty
    Q. What will the penalty be for non-compliance?

    A.

    • Failure to comply with the tax-inclusive pricing requirements is an offence. Offenders are liable for summary conviction. An offence will lead to a fine of not less than $100 and not more than $5,000 or imprisonment for not more than 30 days, or both.
      Clearly, our initial efforts will focus on educating businesses so they are aware of the tax-inclusive pricing requirements and are able to comply with them.

      
      Dual-Pricing
      Q.

      • Why are businesses allowed to display both tax-in and tax-out prices?

      A.

      • Dual-pricing will minimize competitive inequities between businesses located inside and outside the participating region.
        Dual-pricing will also allow businesses to forgo major modifications to cash registers and still comply with tax-inclusive pricing requirements.
        We expect that, in the long run, businesses will adopt full tax-in pricing to meet the preference of Canadian consumers.

      
      Flexibility
      Q.

      • What flexibility have participating governments provided so that tax-inclusive pricing can be implemented without undue costs to registered businesses?

      A.

      • The participating governments have undertaken extensive consultations with businesses to obtain their views, to ascertain insights into the retailing process and to ensure that the tax-inclusive pricing policy accords with modern marketing practices.
        As a result, the tax-inclusive pricing guidelines provide flexibility to ensure that tax-inclusive pricing is implemented smoothly. The guidelines that will provide compliance flexibility for business include:
        - Merchants can group products in bins or on shelves, including goods pre-priced on a tax-exclusive basis, and merely post a common tax-inclusive price. Bin- and shelf-pricing for pre-priced goods will eliminate the need to re-sticker a vast amount of products.
        - Vendors can dual price � display the tax-inclusive price alongside the tax-exclusive price.
        - National catalogues may display tax-out prices exclusively with prominent disclaimers on the cover page and every second page thereafter stating that prices do not include sales tax (this rule will be subject to a review after the first year of tax-inclusive pricing).
        As a result of this flexibility, tax-inclusive pricing can be implemented without undue costs to businesses.

      
      Coupons
      Q.

      • What will be the tax treatment of coupons under the harmonized sales tax?

      A.

      • The tax treatment of coupons under the harmonized sales tax will be the same as under the GST with one modification.
        To facilitate the introduction of tax-inclusive pricing, additional flexibility will be introduced for percentage discount coupons where the coupon is issued and redeemed by the vendor.
        Vendors are currently required to treat this type of coupon as reducing the price payable by the recipient before applicable taxes are applied.
        To simplify the usage of tax-inclusive pricing, all vendors will now have the option to treat this type of coupon as one that reduces the total amount payable, including taxes, which means that the coupon is treated as including tax.
        Issuers of this type of coupon are eligible to claim an input tax credit equal to the tax fraction of the coupon value.

      
      Federal and Provincial Government Entities and Industries Under Federal and Provincial Jurisdiction
      Q.

      • Why have the participating governments required federal and provincial government entities and industries under their jurisdiction to comply with tax-inclusive pricing?

      A.

      • The federal and provincial governments recognize that tax-inclusive pricing responds directly to the strong preference expressed by Canadians to know the full price of goods and services in advance of their purchases.
        However, the authority to legislate tax-inclusive pricing is subject to the division of powers between the federal and provincial governments under the Constitution. Therefore, the federal government responded to the preferences expressed by Canadians by requiring entities and industries under federal jurisdiction to have all price information displayed in-store.
        Price information in respect of federal government entities and industries under federal jurisdiction must be on an HST-inclusive basis when displayed in participating provinces and on a GST-inclusive basis in non-participating provinces.
        With tax-inclusive pricing, consumers will know the final price of their intended purchases prior to paying for them at the cash register.

      
      Federal and Provincial Parks and Museums
      Q.

      • Will taxable admission fees to federal and provincial parks and museums be displayed or advertised on a tax-inclusive basis?

      A.

      • Federal and provincial parks and museums will be required to display and advertise their admission fees on an HST-inclusive basis in participating provinces and on a GST-inclusive basis in non-participating provinces.