D'Arcy and I were researching provincial sales taxes for an ecommerce app today, and we came across something sadistic. In PEI and Québec, the provincial sales tax is charged on the GST! For example, PEI has 10% (!!!) provincial sales tax, according to the PEI government. It's applied after the GST, though, which makes this a thinly veiled lie.
Let's say you buy something for $100 in PEI. The GST is 7% or $7. The PST is 10%... so that's $10, right? Wrong. The PST is calculated against the full amount, with the GST! $100 + $7 = $107. 10% of $107 is $10.70. The total amount you owe is $117.70. You just paid 70 cents PST for buying... the GST!
Québec does the same thing. They claim to have 7.5% PST, but in fact they charge after the GST.
The correctly adjusted tax rates are: PEI - 10.7%, Québec - 8.025%. Most ecommerce software gets this wrong, and that causes the business that use it to be short on their tax remittances. Theoretically, this could lead to a bill from the provinces.
Clearly this is a way to hide taxes away from the electorate. PEI and Québec should be ashamed!
It used to be like that in NS too. When I was growing up, sales tax in NS was 11%. It was charged on top of the GST as well, making the total sales tax 18.77%. When we got the HST, the GST and PST were combined and rolled into one 15% sales tax. We were all excited, only 15%!
Posted by: Todd | October 04, 2005 at 03:30 AM
I hit this problem when I was doing the CBC ecommerce site. I had no idea that taxes worked that way, and neither did the client, until their tax auditors pointed out the bug. A bit embarrassing.
Posted by: Willer | January 01, 2006 at 02:47 PM