Ontario Retail Sales Tax (ORST)

Retail Sales Tax (RST) was implemented in Ontario on September 1, 1961. RST is a single-stage tax, which means the final consumer pays it. RST is applied at various rates on most goods, taxable services, prices of admissions, and certain insurance premiums.

Exemptions

The Retail Sales Tax Act outlines the following exemptions:

Unconditional
Basic groceries, gasoline, water, electricity, natural gas, footwear under $30, prescription drugs and medicines, children’s clothing, various medical devices, books, and newspapers are among the goods and services that are unconditionally exempt from ORST.

Conditional
Conditional exemptions depend upon how items are used, such as farm implements and machinery, manufacturing equipment and consumables, equipment used by hospitals and religious worship, and more.

RST returns

Registrants are required to collect tax on all taxable sales unless the purchaser provides a valid purchase exemption certificate. Tax collected on taxable sales is reported on line 2 of the RST return. Tax on purchases for own use, such as goods removed from exempt inventory, manufactured goods, or imported goods, is reported on line 3 of the RST return. Registrants are entitled to claim compensation up to a maximum of $1,500 for each 12-month period ending March 31. Compensation is only calculated on tax collected as entered on line 2. Compensation claimed on line 5 is deducted from tax collected and tax on purchases for own use and the difference remitted.

Refunds

Tax refunds are available in the following circumstances:

• Tax paid in error on exempt goods and services (goods for resale, manufacturing equipment, packaging materials, etc.)
• Tax paid on goods purchased in Ontario and permanently removed and used outside Ontario
• Tax paid in error on real property contracts

Tax on goods, taxable services, prices of admission, and insurance premiums

These four rates are used as follows:

1.    5%

• Transient accommodation
• American plan or other arrangements where meals and accommodation for a period of less than one month are provided for one price

2.    8%

• All taxable goods other than liquor, beer, or wine
• Prepared food products for a total charge that is over $4.00 excluding GST
• Telecommunications services except 1-800 and 1-888 telephone services
• Labour to install, assemble, dismantle, adjust, repair, or maintain goods that are taxable
• Parking charges
• Premiums for insurance contracts (other than automobile)
• Premiums for funded and unfunded benefits plans

3.    10%

• Alcoholic beverages sold through licensed establishments
• Price of admission over $4.00, excluding GST per person to a place of amusement such as a movie theatre, concert, or amusement park

4.    12%

• Liquor, beer, or wine sold through retail stores (included in purchase price)

Exemptions for manufacturers

Act 7(1) 40
Such machinery, equipment, or processing materials as may be prescribed by the Minister that are purchased to be used by a manufacturer or producer,

• directly in the manufacture or production of tangible personal property
• directly in and exclusively for the research or development of goods to be manufactured or produced by any person
• directly in and exclusively for research into the development of manufacturing processes for use by any person
• directly in and exclusively for more than one of the purposes described in subparagraphs i, ii, and iii, but not machinery, equipment, or processing materials that are used by persons prescribed by the Minister or that are used in a manner, process, industry, or enterprise prescribed by the minister

Exemptions for wholesalers/retailers

The following are exempt from RST:

• Inventory purchased for resale
• Goods shipped directly out of Ontario by the seller
• Pallet wrap, non-returnable containers and shipping labels used to ship goods for resale from a central warehouse to retail stores
• Product labels, hang tags, price tags, and security stickers attached to the goods for resale
• Bags, wrapping paper, tape, and other supplies used to wrap goods at the time of sale
• Equipment such as mixers, grinders, cutters, and trimmers used in bakery and butchering operations (manufacturing exemption)

There is no exemption for goods permanently removed from Ontario.

There is a refund available for goods purchased in Ontario and permanently removed from Ontario.

Exemptions for fast food restaurants
In fast food restaurant operations, the following are exempt from RST:

• Food products for human consumption
• Goods shipped directly out of Ontario by the seller
• Non-returnable paper napkins, cups, straws, and other disposable articles used in the sale or serving of prepared food products, snack foods, or beverages (Disposable items such as coffee filters used in the preparation of the prepared food products, snack foods, or beverages are taxable).

There is no exemption for goods permanently removed from Ontario.

There is a refund available for goods purchased in Ontario and permanently removed from Ontario.