Sales Taxes for Video Producers

1. Sales Taxes for Video Producers • Agenda • Introduction & disclaimer • Two sales taxes that you must understand • Why should you care? • GST / HST • PST • Q&A

2. Sales Taxes for Video Producers • Jim Westwell, CGA - experienced in the film & television industry • I am NOT a tax practitioner • I will share my experiences and past practices to help put things in context • This session is for general information and discussion • You should seek professional advice or do your own research for specific issues • Ask for a guidance from tax help lines • Request a written ruling for specific questions

3. Two sales taxes that you must understand: • GST - Goods & Services Tax - Federal • PST - Provincial Sales Tax - Province of BC • Why should you care? • Failure to comply can cost you BIG BUCKS • Imputed - All taxable sale will be assessed as if you charged on a tax included basis • Heavy penalties and interest for 3 years retroactive

4. GST - Goods and Services Tax • A “value added tax” - Hits the supply chain • Federal jurisdiction - Canadian territory • Applies to most good &/or services • Exceptions: • Payroll • Basic Groceries • Medical & Dental Services • Financial Services & Interest • Insurance & residential rents

5. GST -Goods and Services Tax • Almost everyone pays the GST - No Exemptions • Except for “0 Rated” sales such as exports (and above exceptions) • If you ship a finished DVD to a customer outside of Canada - No GST • If you only supply services to a foreign client in Canada - Charge GST • Place of service rules

6. GST -Goods and Services Tax • Final GST liability is with the final consumer of the product or service • All others who pay GST along the supply chain can claim GST paid or incurred as an Input Tax Credit (ITC) • Supply chain vendors MUST be registered for GST to claim Input Tax Credits

7. GST -Goods and Services Tax • Registration requirements: • If you charge GST • If you have revenues of $30,000 per year • If registered you must charge and remit GST on all sales • You can opt to file tax returns • Monthly • Quarterly • Annually

8. GST -Goods and Services Tax • Accounting records must be kept • Record all sales and taxes charged thereon • Record all expenses and GST paid thereon • Record all Capital (Equipment & Software) purchases and GST paid thereon • Your records can be your best friend or worst enemy • Do them right and DO NOT cut corners • You will eventually be audited so be ready

9. GST -Goods and Services Tax • Receipt requirements • $30.00 (including all taxes) or over: • Amount of GST or statement that GST is included and identification of items taxed • Supplier’s GST registration number • $150 or over: • Above requirements • Purchaser’s name • Terms of payment • Description to identify each item

10. GST -Goods and Services Tax • Tax returns • File on time and stay off their radar • Report all sales for the period even if you have not collected the receivable • Calculate the total GST charged for the period (collected or not) • Calculate total GST incurred (Input tax Credit) for the period (paid or not) • Pay or claim a refund on the difference

11. GST -Goods and Services Tax • “Quick Method” • Annual sales (including tax) under $200,000 • No need to account for GST Input Tax Credits • Remit a flat percent of sales plus tax: • 4% of first $30,000 of sales including GST tax • 5% on remaining sales and GST billed • You keep the difference • Can still claim Input Tax Credits on capital items - such as cameras, software & computers

12. GST -Goods and Services Tax • Example of “Quick Method” • Annual sales & tax -50,000+3,500=$53,500 • Remit: • 4% on first $30,000 = $1,200 • 5% on remaining 23,500 = 1,175 • Total tax paid $2,375 • Total tax collected 3,500 • Net Input Tax Credit $1,125

13. GST -Goods and Services Tax • Harmonized Sales Tax - HST • All GST registrants must collect and remit 15% of “taxable supply” in: • Nova Scotia • New Brunswick • Newfoundland & Labrador • Same rules as GST • Make payment s to CRA

14. GST -Goods and Services Tax • Self-assessment • Any goods that you have taken from the business on which as an ITC has been claimed • Any goods and services that you import into Canada that were not taxed at the border • Space on the tax form to report & offset against other tax issues • Beware: This is a standard target of opportunity for GST auditors

15. PST - BC Provincial Sales Tax • Retail Sales Tax • Applies to sale or lease of “Tangible Personal Property “(TPP) • All “Vendors” of “TPP “ must register & collect PST on sales of their product • Also applies to some “Taxable Services”

16. PST - BC Provincial Sales Tax • Exemptions apply to materials that become a component part of the finished product • DV tapes (assuming that the client gets them) • DVD blanks & cases • Ribbons & labels • DVD case cover paper and toner or ink • Other exemptions include groceries, books, bicycles, and services

17. PST - BC Provincial Sales Tax • Bulletin SST 053 specifies “Videotaped Events” • Requires tax on ALL “charges that the customer must pay to acquire the video tape” • Travelling expenses • Labour • Other amounts

18. PST - BC Provincial Sales Tax • Video producer must pay PST on his/her “purchases for business use” • Cameras, lighting, microphone & tripods • Computers, software and printers • Office furnishings, supplies and overhead • Camera repairs (“taxable services”)

19. PST - BC Provincial Sales Tax • Bulletin SST 076 may apply if videographer services a “Motion Picture” • May be exempt from charging PST for services if he supplies “Owner Operated Equipment” • Contract must specify responsibility for operating the equipment

20. PST - BC Provincial Sales Tax • Self-assessment required: • On all purchases outside of BC (if not taxed or exempted) • All purchases in BC that were not otherwise taxed or exempt • Exempt goods for resale that are later used for personal or business use • This is a favourite area for auditors so play it straight

21. PST - BC Provincial Sales Tax • Accounting records and tax returns • Same basic rules as for GST

22. Summary • Sales taxes are a serious matter • Ignorance of the requirements is NOT a defense • If you are in business, • Know what is required to comply with sales tax laws and regulations • Run your business accordingly

23. Final Words of Advice • Retroactive taxes, penalties and interest can KILL your business and put you into personal bankruptcyso don’t fool around. • Be honest and the auditors will lose interest in you

24. Thanks for your attention. • Questions and Comments