'Accounting disaster:' Holiday tax break creates confusion for retailers

Ottawa's GST/HST tax breaks went into effect this weekend, meaning Ontarians were able to save 13 per cent on some items, but while those savings are undoubtedly a gift for consumers, business owners are struggling to grasp the new rules.

The tax break applies to a slew of items, from prepared foods, beer and wine, some snacks and restaurant meals to children's clothing and toys, books and video games.

The owner of a board game store in Barrie has been left scrambling to figure out how the rules apply to him.

"I didn't even find out what was included until Friday evening because I was phoning my distributor saying what is/what isn't?" said Vincent Booth, Sir-Games-A-Lot owner.

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Games restricted by ages 14 and over are not exempt under Ottawa's rules, leaving many items on children's Christmas lists taxable.

Booth said 'Zombicide,' a zombie-themed board game that is played similarly to other games that are exempt, is very popular with youth and is mainly age-restricted due to its theming.

Of note, Booth added, a Marvel version featuring superheroes is also restricted to the tax rules.

"Accounting-wise, it's a disaster," Booth said. "My computer says 'game', so I charge tax on games. I have to go through every single game, I've got to check whether or not it says 14+ and take that out, make a completely new tax bracket, and then put that into a different tax bracket."

Barrie's Chamber of Commerce is worried what implications this could have on store owners come tax season.

"It's just one thing that small businesses didn't really need at this time," said Paul Markle, Chamber of Commerce executive director.

Markle said he's been fielding questions from storeowners since the tax break was announced.

The Canadian Federation of Independent Business (CFIB) has stated that the majority of small businesses are against the tax break itself, according to its flash survey taken between November 26 and 27.

The CFIB stated that businesses do not have to follow through with the tax break, should they decide not to.

But during a news conference on Saturday, Rechie Valdez, the federal minister of small business, told reporters that the government “expects” retailers to comply.

“The Canada Revenue Agency will take a practical approach when it comes to compliance,” the minister said. “As long as small businesses do their best to comply with the legislation and demonstrate their ability to be able to do that, then the Canada Revenue Agency will not focus on them in terms of compliance.”

But Markle remains skeptical that Ottawa will follow through with what it's said.

"There's a certain mistrust with regards to whether these are going to be tax implications afterwards," he added. "How do they handle input tax credits, those kinds of things which are a real concern.

You know, (if) they're not bringing in as much income, as much tax in, and then they (businesses) get credits back, does that create a situation where they have a credit and is it going to trigger an audit? The CRA has said they're not, but is that actually the case or is that something that's going to come back and haunt them."

The tax holiday is expected to cost the federal government about $1.6 billion and could cost Ontario $1 billion in lost revenue.

Ottawa's tax break will be waived until February 15.