1. Prepared by: Horne LLP 1 Ontario Sales Tax Harmonization Horne LLP March 31 st, 2010

2. Prepared by: Horne LLP2 Outline Background Background Overview Overview GST / HST Basics GST / HST Basics Transition Rules Transition Rules Recaptured ITC’s Recaptured ITC’s New Place of Supply Rules New Place of Supply Rules Winding Down the RST Winding Down the RST Preparing for HST Preparing for HST Mandatory Electronic Filing Mandatory Electronic Filing Questions and Answers Questions and Answers

3. Prepared by: Horne LLP3 Background Implementation of GST / QST / HST Implementation of GST / QST / HST Comprehensive Tax Reform in Ontario and B.C. Comprehensive Tax Reform in Ontario and B.C. Corporate tax cuts Corporate tax cuts Personal tax cuts Personal tax cuts Transitional payments Transitional payments Sales Tax Harmonization Sales Tax Harmonization March 28 th, 2009 – Budget Announcement March 28 th, 2009 – Budget Announcement October 14 th, 2009 – General Transition Rules October 14 th, 2009 – General Transition Rules December 15 th, 2009 – Federal and Ontario Bills Pass December 15 th, 2009 – Federal and Ontario Bills Pass February 1 st, 2010 – Recapture of ITC’s February 1 st, 2010 – Recapture of ITC’s February 25 th, 2010 – New Place of Supply Rules February 25 th, 2010 – New Place of Supply Rules Future? Future? Information: Information: Canadawww.cra.gc.ca/harmonization Canadawww.cra.gc.ca/harmonizationwww.cra.gc.ca/harmonization Ontariowww.ontario.ca/taxchange Ontariowww.ontario.ca/taxchangewww.ontario.ca/taxchange

4. Prepared by: Horne LLP4 Overview of HST Single Rate Value Added Tax Effective July 1 st, 2010 Single Rate Value Added Tax Effective July 1 st, 2010 13% rate (8% OVAT, 5% GST) 13% rate (8% OVAT, 5% GST) Administered by CRA Administered by CRA Same base and structure as GST Same base and structure as GST Exceptions? Exceptions? Point of Sale Rebates Point of Sale Rebates Recaptured ITC’s Recaptured ITC’s Continuing Taxes Continuing Taxes New Housing Rebate New Housing Rebate Loss of Vendor Compensation Loss of Vendor Compensation

5. Prepared by: Horne LLP5 Point of Sale Rebates Children’s clothing and footwear Children’s clothing and footwear Children’s car seats and car booster seats Children’s car seats and car booster seats Diapers Diapers Feminine hygiene products Feminine hygiene products Books (including audio) Books (including audio) Printed newspapers Printed newspapers Prepared food products sold for $4 or less Prepared food products sold for $4 or less

6. Prepared by: Horne LLP6 Recaptured ITC’s Applies to large businesses, financial institutions, and related entities Applies to large businesses, financial institutions, and related entities Restricts OVAT portion of ITC for: Restricts OVAT portion of ITC for: Energy Energy Telecommunications services Telecommunications services Road vehicles less than 3,000 kilograms Road vehicles less than 3,000 kilograms Food, beverage and entertainment expenses Food, beverage and entertainment expenses

7. Prepared by: Horne LLP7 Continuing Taxes (ORST?) Alcohol Alcohol Transient accommodation Transient accommodation Private sales of specified vehicles not subject to GST Private sales of specified vehicles not subject to GST Insurance Premiums (except auto) Insurance Premiums (except auto)

8. Prepared by: Horne LLP8 New Housing Rebate Refunds for buyers of: Refunds for buyers of: New homes New homes New residential rental property New residential rental property OVAT refund of up to $ 24,000 OVAT refund of up to $ 24,000 Regardless of the price of new home Regardless of the price of new home

9. Prepared by: Horne LLP9 GST / HST Basics Recipient-person liable to pay consideration for the supply Recipient-person liable to pay consideration for the supply Supply-provision of property or a service in any manner, including sale, transfer, barter, exchange, license, rental, lease, gift or disposition Supply-provision of property or a service in any manner, including sale, transfer, barter, exchange, license, rental, lease, gift or disposition Consideration-includes any amount that is payable for a supply by operation of law Consideration-includes any amount that is payable for a supply by operation of law GST/HST is payable by the recipient on the earlier of: GST/HST is payable by the recipient on the earlier of: The day the consideration for a supply is paid, and The day the consideration for a supply is paid, and The day the consideration for the supply becomes due The day the consideration for the supply becomes due

10. Prepared by: Horne LLP10 Consideration Becomes Due Earliest of the following days: Earliest of the following days: The date of the invoice for the amount of the supply; The date of the invoice for the amount of the supply; The day the supplier first issues the invoice for the amount; The day the supplier first issues the invoice for the amount; If there is an undue delay in issuing the invoice, the day the supplier would have issued the invoice; and If there is an undue delay in issuing the invoice, the day the supplier would have issued the invoice; and The day the client is required to pay the amount under a written agreement. The day the client is required to pay the amount under a written agreement.

11. Prepared by: Horne LLP11 General Transition Rule Supply on or after July 1 st, 2010 and Consideration due or paid without becoming due (A)(B)(C)(D) Oct. 14th May 1stJuly 1st 2009 20102010 A. No OVAT, ORST applies B. Certain purchasers required to self-assess OVAT (eg. financial institutions, those using simplified accounting methods), ORST applies C. Vendors required to collect OVAT, no ORST applies D. HST rules apply

12. Prepared by: Horne LLP12 Requirement to Self Assess OVAT Certain purchasers (other than consumers) are required to self-assess the OVAT if: Certain purchasers (other than consumers) are required to self-assess the OVAT if: The supply is: The supply is: Not used exclusively in commercial activities, (e.g. exempt supplies) or Not used exclusively in commercial activities, (e.g. exempt supplies) or Subject to ITC restriction or recapture Subject to ITC restriction or recapture Or, the purchaser: Or, the purchaser: Uses simplified procedures to calculate net tax under the ETA (e.g. Quick Methods), or Uses simplified procedures to calculate net tax under the ETA (e.g. Quick Methods), or Is a selected listed financial institution using the special attribution method to calculate net tax Is a selected listed financial institution using the special attribution method to calculate net tax

13. Prepared by: Horne LLP13 Transitional Rule – Sale of Goods Sale of goods where goods are delivered and ownership is transferred to the purchaser on or after July 1 st, 2010 YesNo Yes No

14. Prepared by: Horne LLP14 Transitional Rule – Lease of Goods Lease of goods when a lease interval begins before July 2010 and ends on or after July 31 st, 2010 No Yes

15. Prepared by: Horne LLP15 Transitional Rule - Services Services performed during the period that includes July 1 st, 2010 NoYes No Yes

16. Prepared by: Horne LLP16 Transitional Rule – Intangible Personal Property IPP includes contractual rights, intellectual property, rights to acquire a membership, etc. Consideration is subject to HST if it becomes due, or is paid without becoming due, on or after July 1 st, 2010 Consideration is subject to HST if it becomes due, or is paid without becoming due, on or after July 1 st, 2010

17. Prepared by: Horne LLP17 Transitional Rule – Non-Residential Real Property HST applies if ownership and possession are transferred on or after July 1 st, 2010

18. Prepared by: Horne LLP18 Transitional Rules – Special Cases Subscriptions Subscriptions Memberships Memberships Lifetime Memberships Lifetime Memberships Admissions Admissions Freight Services Freight Services Passenger Services Passenger Services Transportation Passes Transportation Passes Prepaid Funeral Arrangements Prepaid Funeral Arrangements Direct Sellers Direct Sellers Continuous Supplies Continuous Supplies Budget Payment Arrangements Budget Payment Arrangements

19. Prepared by: Horne LLP19 Transitional Rules–Combined Supply Property supplied will be deemed to be a separate supply: if property and/or services are supplied together as a single supply if property and/or services are supplied together as a single supply Ownership or possession of the property has transferred to the recipient before July 2010, and, Ownership or possession of the property has transferred to the recipient before July 2010, and, The property is not subject to OVAT under the general transitional rules if it were supplied separately The property is not subject to OVAT under the general transitional rules if it were supplied separately

20. Prepared by: Horne LLP20 Transitional Rule – Progress Payments Progress Payments (to construct, renovate, repair RP, ships etc) and Consideration due or paid without becoming due: (A)(B)(C) Oct. 14th July 1st 2009 2010 A. No OVAT B. Vendor required to collect OVAT on progress payments C. HST rules apply Holdbacks from a Progress Payment are subject to the same allocation rule as the Progress Payment even if paid or payable after June 2010.

21. Prepared by: Horne LLP21 Recaptured Input Tax Credits Similar to Quebec restrictions Similar to Quebec restrictions Apply to: Apply to: Large business, > $ 10 million threshold amount Large business, > $ 10 million threshold amount Financial institutions Financial institutions Apply for 8 years, with a 3 year phase out Apply for 8 years, with a 3 year phase out Do not apply to resale or resupply Do not apply to resale or resupply Do not apply to public sector bodies or farming Do not apply to public sector bodies or farming Do not apply to production use – use of proxies Do not apply to production use – use of proxies Allocation and data capture Allocation and data capture

22. Prepared by: Horne LLP22 Recaptured ITC’s - continued Energy Energy Telecommunications Telecommunications Road Vehicles Road Vehicles Fuel for Road Vehicles Fuel for Road Vehicles Food, beverages, and entertainment Food, beverages, and entertainment

23. Prepared by: Horne LLP23 New Place of Supply (POS) Rules Place of supply Goods by way of sale: Goods delivered or made available in Particular Province Goods delivered or made available in Particular Province a particular province Goods by way of lease Goods in a particular province at Particular Province Goods in a particular province at Particular Province commencement of lease interval Services – General Rules Where recipient’s address is known and is Particular province Where recipient’s address is known and is Particular province situated in a particular province Where recipient’s address is unknown and the Participating province in which Where recipient’s address is unknown and the Participating province in which Canadian portion of the service is performed most of the service performed primarily in the participating provinces Where the recipient's address is unknown and A non-participating province Where the recipient's address is unknown and A non-participating province the Canadian portion of the service is performed primarily outside the participating provinces primarily outside the participating provinces

24. Prepared by: Horne LLP24 New Place of Supply (POS) Rules - continued Place of supply Intangibles – General Rules Where property can be used only Where property can be used only primarily in the particular participating primarily in the particular participating province province Where property can be used only in a Particular participating province Where property can be used only in a Particular participating province particular participating province particular participating province Where property can be used in more Participating province in which Where property can be used in more Participating province in which than one participating province most rights would be used if than one participating province most rights would be used if all rights were used all rights were used Where property can be used only Where property can be used only primarily outside participating provinces Non-participating province primarily outside participating provinces Non-participating province Where use of property not geographically Where use of property not geographically specific: specific: Where address of the recipient is knowProvince in which address is situated Where address of the recipient is knowProvince in which address is situated Where address of recipient is unknownThe participating province with the Where address of recipient is unknownThe participating province with the highest rate highest rate

25. Prepared by: Horne LLP25 Winding Down the ORST Small business transition credit Small business transition credit ORST transitional rules ORST transitional rules Final ORST returns Final ORST returns ORST refunds and rebates ORST refunds and rebates Returns and exchanges Returns and exchanges Transitional ORST inventory rebate Transitional ORST inventory rebate Anti-avoidance Anti-avoidance Additional information Additional information

26. Prepared by: Horne LLP26 Transitional Rule - ORST Supply of Goods, Services, Admissions (supplied on or after July 1 st, 2010 and Consideration due or paid without becoming due (A)(B)(C)(D) Oct. 14 th May 1st July 1 st July 31 st 2009 20102010 2010 A. ORST applies (No OVAT) B. ORST applies (except if used exclusively in commercial activities, or purchaser required to self assess OVAT*) C. No ORST applies (vendor required to collect OVAT*) D. No ORST applies (HST rules apply*) *Except on services performed substantially all before July 2010, and lease intervals beginning before July 2010 and ending before July 31 st, 2010.

27. Prepared by: Horne LLP27 Final ORST Returns No ORST vendor’s compensation for returns filed for periods ending after March 31 st, 2010 No ORST vendor’s compensation for returns filed for periods ending after March 31 st, 2010 Final ORST returns are required to be filed by July 23 rd, 2010 Final ORST returns are required to be filed by July 23 rd, 2010 Supplemental ORST returns are required to be filed by the 23 rd day of the month following for any ORST collected or payable after June 2010 Supplemental ORST returns are required to be filed by the 23 rd day of the month following for any ORST collected or payable after June 2010 All supplemental ORST returns are required to be filed by November 23 rd, 2010 All supplemental ORST returns are required to be filed by November 23 rd, 2010

28. Prepared by: Horne LLP28 ORST Refunds and Rebates Time limits for claims remain in effect until the earlier of expiry or June 30 th, 2014 Time limits for claims remain in effect until the earlier of expiry or June 30 th, 2014 Existing assessment, objection and enforcement provisions under the RST Act apply to past transactions (until expiry) Existing assessment, objection and enforcement provisions under the RST Act apply to past transactions (until expiry)

29. Prepared by: Horne LLP29 ORST Returns and Exchanges Goods subject to ORST bought (before July 2010) and returned (after June and Before November 2010) for: Full refund – ORST* refunded Full refund – ORST* refunded Straight exchange – no ORST or OVAT effect Straight exchange – no ORST or OVAT effect Exchange with partial refund – partial ORST* refund Exchange with partial refund – partial ORST* refund Exchange with an additional payment – HST applies to the additional payment Exchange with an additional payment – HST applies to the additional payment * + applicable GST

30. Prepared by: Horne LLP30 ORST Returns and Exchanges - continued Goods not subject to ORST bought (before July 2010) and returned (after June 2010 and before November 2010): For full refund – ORST N/A – no ORST refund For full refund – ORST N/A – no ORST refund OVAT applies to the full consideration for the replacement property for a: Straight exchange Straight exchange Exchange with partial refund Exchange with partial refund Exchange with additional payment (+GST) Exchange with additional payment (+GST)

31. Prepared by: Horne LLP31 ORST Returns and Exchanges - continued No point-of-sale ORST adjustments for goods returned on or after November 1 st, 2010 No point-of-sale ORST adjustments for goods returned on or after November 1 st, 2010 HST applies to the full consideration for the new item for any exchange HST applies to the full consideration for the new item for any exchange Purchaser can file a refund claim for: Purchaser can file a refund claim for: ORST paid in error ORST paid in error GST paid on the initial transaction GST paid on the initial transaction

32. Prepared by: Horne LLP32 Preparing for HST Invoice and billing systems Invoice and billing systems When to charge/pay 5% vs. 13% When to charge/pay 5% vs. 13% A/P systems: A/P systems: Ability to track purchases and self-assessment requirements Ability to track purchases and self-assessment requirements Review contracts/leases that straddle July 1 st, 2010 Review contracts/leases that straddle July 1 st, 2010 Review prepayments Review prepayments Planning for acceleration or deferral of purchases Planning for acceleration or deferral of purchases

33. Prepared by: Horne LLP33 Impact of HST On…. Manufacturers Manufacturers Retailers Retailers Builders Builders Non-Profit Sector Non-Profit Sector Financial Institutions Financial Institutions

34. Prepared by: Horne LLP34 Non-Profit Sector Rebates Public Service Body Rebates Rebate % of HST Paid OVATGST Municipalities78%100% Universities and colleges78% 67% School boards93% 68% Hospitals87% 83% Charities and NPO’s82% 50%

35. Prepared by: Horne LLP35 Mandatory Electronic Filing For all reporting periods ending on or after July 1 st, 2010 for: GST/HST registrants (except charities) with greater than $1.5 million in annual taxable supplies (including those of their associates GST/HST registrants (except charities) with greater than $1.5 million in annual taxable supplies (including those of their associates GST/HST registrants required to recapture ITC’s in Ontario and B.C. GST/HST registrants required to recapture ITC’s in Ontario and B.C. Builders affected by the HST transitional housing measures in Ontario and B.C. Builders affected by the HST transitional housing measures in Ontario and B.C.

36. Prepared by: Horne LLP36 Questions and Answers