MUST READ, Act Now: Tax on Private Transf of Cars increasing to 13% in Ontario
Folks, RedFlagDeals.com readers and guests,
Please help or help me challenge the legality of the 13% Retail Sales Tax (PST) on private sales of used vehicles in Ontario.
Starting July 1, 2010, 8% Provincial Sales Tax (PST) will combine with the 5% Federal GST to become the 13% Harmonized Sales Tax (HST). PST will cease to exist by itself EXCEPT the PST on private sales of used vehicles in Ontario. Look under the 2009 Ontario Budget, it says:
http://www.fin.gov.on.ca/en/budget/onta ... chpt3.html
"Private Transfers of Motor Vehicles: Similar to the tax treatment in other provinces, Ontario would retain a sales tax on private transfers of used motor vehicles. This would help to ensure a level playing field between used vehicles sold through dealerships and private sales."
Now look at the Harmonized tax changes:
"Private Resale of Car (including Registration) No GST - 8% PST - Changes to 13%: HST does not apply; however, Ontario will maintain the PST on private transfers of used vehicles at a rate of 13 per cent to help ensure a level playing field between sales by dealerships and private sales."
It's further explained here:
http://news.ontario.ca/mof/en/2009/11/o ... wth-1.html
"As announced in the 2009 Budget, Ontario would retain a sales tax on private transfers of used vehicles, similar to the tax treatment in other provinces. The tax rate would be 13 per cent, to help ensure a level playing field between sales by GST/HST registrants (e.g. car dealerships) and private sales. The tax would generally apply to the same vehicle classes that are currently subject to RST, including boats and aircrafts.
Applying the 13 per cent rate to private transfers of used vehicles would raise about $70 million per year in additional revenue.
Exemptions under the current RST on used vehicles would be maintained. The exemption for gifts by family members would be expanded to include siblings, similar to the treatment in other provinces."
WHAT IS THE ONTARIO GOVERNMENT SAYING?
PST is combining with GST to form HST, but there were no (Federal) GST on private sales of used vehicles before July 2010 and neither will there be a Federal tax on the private sales after. So in order to (1) help ensure a level playing field between sales by dealerships and private sales and (2) be similar to the tax treatment in other provinces, the Province of Ontario will not only "maintain the PST" but also to increase the rate from 8% to 13% after June. And the full 13% goes to the Ontario Government and 0% to the Federal Government.
WHY NO GST (AND NO HST) ON PRIVATE SALES OF USED VEHICLES?
GST and HST are based on the Value Added Tax principle, where it strives to streamline a fair consumption tax process while avoiding tax duplications. The full sales taxes had already been paid when the sellers first bought the vehicles so if there were additional tax on the transfers, it would be a duplicate tax. In private sales transactions, it doesn't mean the buyers do not pay any GST or HST; the GST or HST are already included in the price of the used vehicles and being reimbursed to the private sellers.
THE "LEVEL THE FIELD" CARD
Tax on new or used vehicles from car dealerships is 13%, where tax on used vehicles in private sales is only 8% (PST) before July 1, 2010. The field is clearly not level and increasing the 8% PST to 13% is not only fair but also the simplest concept to tell the public?
IS THE ONTARIO GOVERNMENT TELLING THE TRUTH?
There IS a major difference between cars to be sold from car dealerships and used cars in public hands. For cars in the inventory of car dealerships, whether from lease returns, new or used car trade-ins, they are carried at before-tax cost. So when the dealers sell you their cars from inventory, the government would need to collect the full tax. Whereas for used cars from private sellers, the cars are already tax-inclusive as full taxes were already paid when they were originally purchased.
PST on private sales of used cars is a tax on something that has already been taxed. It is a tax on the vehicle transfer similar to the land transfer tax on real estate transactions. But this transfer tax only applies to private sales, and it's 8% going to 13%. THE REAL LEVELING THE FIELD WOULD BE TO REMOVE THIS TRANSFER TAX ALL TOGETHER. Just like the GST that is not being applied to private sale of used cars.
This PST has always been a transfer tax and the intent to make it the same rate as the HST is just this government's attempt to stretch their illusion forward. Imagine if you want to sell your house and there is a 13% land transfer tax on private sales, it will sure have effect on your asking price if you insist on a private sale.
The Ontario government says this is a similar tax treatment to other provinces. So similar that Ontario is copying the exact theme (from other provinces) in its justification for the increase in PST rate being "Level the Field".
Say if you have a used car that's worth $11,300 tax-inclusive in the used-car market and you are buying a new car that costs $22,600 ($20,000 +13% HST). If you are selling the used-car privately, you'll only get $10,000 from your used car (13% goes to PST) and you'll have to pay $12,600 extra to complete your transaction.
If you do a trade-in and the car dealer gives you $10,000 before-tax for your used car, the extra you'll have to pay is only $11,300 ($20,000-$10,000 = $10,000 +13%)
The difference between the two is $1,300, being the tax on vehicle transfer. But the dealer may not give you what you are looking for... knowing you'll only get $10,000 because of the tax on private sales, the dealer will give you maximum $10,000 / 1.13 = $8,850 before-tax for your used-car, or $10,000 including the tax credit effect.
So either way you'll needlessly surrender $1,300 to the government or to the dealers because of the PST on private sale of used cars.
If you use your own car, or buying one, or switching to or from car leasing, the bottom line is you'll most likely be negatively affected. Ask a qualified and reliable accountant if you are not convinced.
Everything else is being taxed at the same 13% HST rate, and this only surviving PST is going to stick out like a sore thumb if it stays at 8%. So, in order to not to loose this would be legacy but significant revenue source, it is now or never and the time is now to slip this by amidst all the dusts from the HST saga.
WHY IS THIS TAX "WRONG"?
The PST on vehicle private sales is a scam and the "level the field" argument is totally bogus. It is a PRO CAR DEALERSHIP VEHICLE TRANSFER TAX in disguise. It's an anti-competitive punitive tax on transactions outside of car dealerships. Before the rate increase, it's a gift to the car dealerships. After, it's a bonanza. It's the ultimate ticket for car dealerships to monopolize the used-car marketplace.
WHAT YOU CAN DO?
Spread the words,
Start the discussion,
Email your friends, family and co-workers,
Put this in your blog, facebook...
Adapt this post to challenge a similar tax if your jurisdiction is not in Ontario
Ask your accountants,
Tell the politicians, Federal and Provincial,
Contact Dalton https://www.premier.gov.on.ca/feedback/ ... sp?Lang=EN