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

Sales Taxes for Video Producers n Jim Westwell, CGA - experienced in the film & television industry n I am NOT a tax practitioner – I will share my experiences and past practices to help put things in context n 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

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

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

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

GST -Goods and Services Tax n Final GST liability is with the final consumer of the product or service n 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

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

GST -Goods and Services Tax n 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 n 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

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

GST -Goods and Services Tax n 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

GST -Goods and Services Tax n “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: n 4% of first $30,000 of sales including GST tax n 5% on remaining sales and GST billed n You keep the difference – Can still claim Input Tax Credits on capital items - such as cameras, software & computers

GST -Goods and Services Tax n Example of “Quick Method” n Annual sales & tax -50,000+3,500=$53,500 n 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

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

GST -Goods and Services Tax n 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 n Space on the tax form to report & offset against other tax issues – Beware: This is a standard target of opportunity for GST auditors

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

PST - BC Provincial Sales Tax n 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 n Other exemptions include groceries, books, bicycles, and services

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

PST - BC Provincial Sales Tax n 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”)

PST - BC Provincial Sales Tax n 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

PST - BC Provincial Sales Tax n 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 n This is a favourite area for auditors so play it straight

PST - BC Provincial Sales Tax n Accounting records and tax returns – Same basic rules as for GST

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

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

Thanks for your attention. n Questions and Comments