TaxCycle | Products | Pricing | Training | Documentation | Support | News

HST registrant selling a piece of equipment

Sole proprietor (HST registrant) who provides services is selling one of their older pieces of equipment for $5000.00

They are in the business of selling services, not goods.

They should charge HST on the sale of the equipment just like they would on a service, correct?

Yes, that is correct. If they haven’t claimed an ITC, they claim it against the tax they collect.

1 Like

@David_R_Officer Thank you for your quick response - greatly appreciated!
Have a great weekend

@NiceGuy
Once a proprietorship becomes a GST registrant than they must apply GST to the sale of any service, goods, or asset.
The GST rules are based on the type of supply. Ordinarily, all supplies are GST rated unless otherwise specified.

Some supplies are Zero rated.

Some supplies are exempt.

https://www.canada.ca/en/revenue-agency/services/tax/technical-information/technical-information-gst-hst/gst-hst-memoranda-series.html#toc3

How and when you claim the ITC on a payment varies by the type of payment.

Generally you claim the ITC on a service when it is due and on an asset when your receive title.

There is an exception when an asset is used partially for business use and partially for personal use such as a vehicle. This depends on the type of vehicle, asset class, and the percentage of business use.

This pages may help to clarify how to calculate the ITC eligibility percentage.

Calculate input tax credits – ITC eligibility percentage

https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/complete-file-input-tax-credit/calculate-eligibility-percentage.html

When you dispose of an asset, then you claim the eligible ITC percentage remaining that you had not previously claimed.

For this reason I find it useful to maintain both a fixed asset continuity worksheet by each individual asset, grouped by class, with business use % and ITC claimed notes.

It is more complex to calculate the eligible GST-HST ITC to claim on vehicles. This is further complicated by electric vehicles. Please note that the CRA reference has not been updated by the new electric vehicle classes.

CRA GST/HST Memorandum 8-2, 2008-03

General Restrictions and Limitations

https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/8-2/general-restrictions-limitations.html

Refer to this third party source for an easier to understand and follow table re ITC allowable on vehicles.

Allan Keon, CPA PC

Tax and HST ITC for purchased or leased vehicles

" Individuals and partnerships must amortize the HST ITC based on the CCA rate depicted above with consideration to the percentage of use in commercial activities unless the percentage is 90% or more, in which case the full HST ITC will be claimed. For instance if a vehicle is purchased for $40,000 plus 13% HST ($5,200), the HST ITC will be calculated as below:"

1 Like

Hi:

Yes, correct they charge HST on the sale.

Greg.

1 Like