All right, as of Monday, April 1, 2013 the H.S.T. (Harmonized Sales Tax) will pass into history in the Province of British Columbia. This has been a very unpopular tax since it was introduced in 2009 and came into effect on July 1, 2010. It was so unpopular that a grass roots revolt took place, with enough people signing petitions that the Provincial Government had to hold a special referendum to decide whether or not it could continue. With the results of the vote in favour of scrapping this tax, the wheels were put in motion to revert this province to the old system (prior to July, 2010) where there were two separate taxes - The Federal G.S.T. (Goods and Services Tax) and the Provincial P.S.T. (Provincial Sales Tax). That is what we will again have as of April 1, 2013.
What’s the difference? On most items the consumer (tax-payer) will not see any change. Instead of paying one tax, there will be 2 taxes shown on your bill, but they will add up to the same amount. However, there are a few exceptions.
Such items as hair cuts, personal services (such as manicures and massages) children’s clothing and restaurant meals did not pay the Provincial Sales Tax. So, there is only a 5% tax levy on these items, instead of the full 12%.
One other notable exemption is real estate sales commissions. Since 2010 sellers of homes listed with a licenced Realtor (R) have paid a 12% tax on the amount of their selling commission.
The average price of a home in the Nelson area is $325,000. Commissions are not a fixed amount, but on a home at that price you can expect to pay about $13,750 in commission on that selling price. **
Under the H.S.T. program, the amount of tax (12%) on $13,750 is $1,650, making a total fee of $15,400.
Next week that tax will be reduced to 5%, or $687.50 on the $13,750 commission for a total fee of $14,437.50.
That’s almost a $1,000 saving! On a more expensive home, the amount of saving with the new tax structure is even greater.
** In case you are concerned that this is a large amount to be collecting on the sale of a home, let me explain further that in most cases the amount is divided evenly between the selling agent and the listing agent, and each agent has a further split (either a percentage or a flat monthly fee) with their brokerage. Also, please note that not all homes sell, so there is no fee payable before a sale completes.
If you are interested in buying or selling a home, please give me a call.