Harmonized Sales Tax (HST) and Employer Health Tax (EHT) are distinct types of taxes in Canada that serve different purposes and affect various stakeholders. Understanding the key differences between these two taxes is crucial for businesses and individuals to navigate their financial responsibilities effectively.
Differences Between HST and EHT
Purpose and Application:
HST is a consumption tax applied to the sale of goods and services in specific provinces. It combines the federal Goods and Services Tax (GST) with the provincial sales tax, streamlining tax collection and administration.
EHT, on the other hand, is a payroll tax levied by the province of Ontario. It’s calculated based on the total remuneration paid to employees and is used to fund Ontario’s health care system.
Affected Entities:
HST impacts both businesses and consumers. Businesses are responsible for charging and collecting the appropriate HST on taxable goods and services. Consumers pay HST when they make purchases.
EHT primarily affects employers in Ontario. Employers with payrolls exceeding a certain threshold are required to pay EHT based on their total payroll expenses.
Calculation and Rates:
HST rates can vary slightly between provinces, but it’s generally a percentage of the purchase price of taxable goods and services. Some items might be exempt or zero-rated, affecting the total HST payable.
EHT is calculated based on total remuneration paid to employees. The tax rates and thresholds for EHT can change annually, and there are exemptions available for certain types of employers.
Reporting and Remittance:
For HST, businesses are responsible for reporting the collected HST and remitting it to the government. They must file HST returns regularly to ensure compliance.
Employers subject to EHT must calculate their liability based on their payroll and remit the tax to the government by the required deadlines. Failing to accurately report and remit EHT can result in penalties.
In conclusion, while both HST and EHT are forms of taxation in Canada, they serve different purposes and target different entities. Businesses and individuals should familiarize themselves with the specifics of each tax to fulfill their financial obligations properly.
