Retail Sales Tax

:: Issue Background
In February 2001, the Ontario Ministry of Finance issued two new RST Guides related to computer programs and related services that replaced all other information pertaining to the application of RST to computer programs.

According to these new guides, consultants must charge RST on any taxable goods or services they provide to their clients. IT staffing firms must assume this responsibility on behalf of our consultants because we, the staffing firm are collecting the fee.

Taxable services include labour provided to install, assemble, repair or maintain computer programs except for custom computer programs.

In the event of an RST audit, you must be able to produce documents to support each tax-exempt sale you have made. Some IT staffing firms were audited for RST retroactively to 1997 - resulting in significant financial assessments.

:: NACCB Canada's Role
NACCB Canada representatives met with government officials, sent correspondence and generally worked within the business community to raise public awareness of this issue and help formulate a response.

Over 30 meetings and consultations took place and the NACCB Canada made seven different submissions to legislators. Ministry of Finance auditors conducted on-site audits of some member companies to review and gain a better understanding of how IT services firms operate.

:: The Result
The result was a "carve out" for IT staffing firms. The NACCB Canada successfully demonstrated that member companies are in the business of providing human resources to clients and are not providing solutions or responsible for deliverables. IT staffing firms are exempt from charging RST to clients.

In 2004, the BC government also introduced changes to retail sales tax as it applies to computer programs and related services. The NACCB Canada was able to use its success in Ontario to ensure that a similar "carve out" for IT staffing firms in BC was established.