Webinar PST-GST: Common Errors and Opportunities

Many businesses believe they have the right processes in place to maximize GST/HST refunds, take advantage of Provincial Sales Tax (PST) exemptions, and avoid overpayments. However, reviews often uncover significant recoverable amounts due to processing errors, system glitches, or misunderstandings of tax laws. This is what two experts, Jay Lerner and James Zhong, were able to demonstrate in an exclusive webinar, which we summarize below.

Common Issues:

• ▪️Processing Issues: Mismanagement of tax on invoices from foreign suppliers, including errors related to GST/HST on USD invoices or confusion about supplier registration numbers.
• ▪️System & Automation Errors: Software errors leading to missed claims for refunds.
• ▪️Legislative Confusion: Misinterpretation of tax laws, particularly for U.S. suppliers. Many businesses unknowingly overpay GST/HST and fail to claim refunds. For example, businesses may pay a “Canadian surcharge” and mistakenly think HST was charged when it wasn’t.

Specific Examples:

• ▪️A Canadian business paid UK VAT on trade show expenses without realizing it was fully recoverable, eventually identifying a $60,000 refund.
• ▪️A system upgrade caused a tax code error, leading to $750,000 in unclaimed GST/HST refunds for 18 months.

Complex Rules:

• ▪️The rules surrounding GST/HST for imports and public service bodies are complicated, leading to overpayments in certain cases.
• ▪️Common issues include misapplication of GST/HST rates and complications around claiming PST exemptions or refunds.

Provincial Sales Tax (PST):

• ▪️PST rules vary greatly between provinces, making it hard to navigate. Some provinces (e.g., Quebec) have their own systems like the QST, and others (e.g., British Columbia, Saskatchewan) have separate retail sales taxes. These variations can lead to confusion and mistakes in tax handling.
• ▪️Exemption and refund processes for PST can be tricky, with varying rules and paperwork requirements. Taxes can also be buried in general ledgers, making it difficult to track.

Other Frequent Issues:

• ▪️Accounting teams may not be familiar with tax exemptions, leading to missed savings opportunities.
• ▪️Vendors may apply the wrong tax rate, either following rules from another province or overcharging to avoid mistakes.
• ▪️Changes in the use of products or services can affect tax obligations, which may be overlooked.
• ▪️Differences in provincial tax rules can overwhelm businesses trying to stay compliant.

These issues show that many businesses may be missing opportunities to recover taxes due to systemic errors or misinterpretations of tax laws.