To Charge Tax Up Front or To Absorb....That Is The Question

[axe_n_gear_music]

Question for you guys, with the HST soon to take effect, and some CP rates going up within Canada as a result, I have had several different personal conversations with different eBayers as to what they regard as the "best plan" regarding tax collecting. We all know that we have to collect and remit the correct taxes, and I am wondering if you guys plan to change your tax collecting procedure, or stay the same.

I am considering absorbing the taxes, (ie, not charging them up front, but removing them as required later so the customer doesn't need to deal with it- although I may have to "up" the prices slightly to help absorb this). What is your opinion on this? I think there are alot of eBay buyers out there that still do not understand the fact that we (as in my business and every other seller on eBay), are actual businesses that are required by law to collect and remit tax.
And many still believe that eBay still has the "garage sale" feel, and don't think they should have to pay tax. I wonder how many potential buyers walk when they read that we collect tax. On a ten dollar item, they probably don't care so much, but on the more expensive items, I think they do.

Whaddaya think?

Cheers,
AXE

[coxengines]

Axe,

We did look at this but decided against it in order to reduce clutter. Many buyers don't even read what is contained in our listings as is.

All of our competitors are located in the USA and don't charge taxes.

98% of our customers are located outside of Canada and it is assumed they will not pay taxes. They are more afraid of almighty customs.

Were our CAD customer base much higher, we would revisit the issue.

Bernie

[axe_n_gear_music]

Thanks Bernie,
Yes it is a tough decision for sure. For some of my items, my competitors are in the USA (where the product comes from), so it is already hard to compete with them as it is. I have to import the items, etc so it costs me way more than my competion to begin with. = less profit for me than they make.

But to be competive, I have to charge similar prices as they do, or risk the possibility of only getting the odd Canadian buyer who wants to keep his biz. in Canada, and understands that in most cases, there is no warranty on these items when they buy from a US seller. (ie they have to purchase from an authorized Can. dealer when in Can. to ensure warranty coverage- most don't realize that, so maybe I need to play that up some more in some of my listings for my potential Canadian buyers).

I think I will likely keep on collecting the tax up front, as I do have a higher percentage of Canadian buyers, and some of my items are quite expensive, so the tax implications are much greater to have to "absorb" in the price.

Cheers,
AXE

[bighillbargains1]

After reading this post yesterday, I've decided to start adding GST/HST as of July 1st. I have absorbed these taxes up and until now.

But this morning I sold two items to a customer in Ontario and after he purchased them, he sent me an email saying: "sure hope there are no taxes on top of that"...

Back to square one rethinking my decision... :_|

[pierrelebel]

My son-in-law was interviewed by CBC-TV (Toronto) about the HST taking effect in a few weeks.

When asked "Will you pass your cost savings through lower prices?" he replied "In fact we will frontload the anticipated annual savings to our customers and give them 10% off any new business in July to let them benefit from our savings!"

The kid is learning fast! 🙂

[dipmicro]

When asked "Will you pass your cost savings through lower prices?" he replied ...

Cost savings? Pierre, I must have missed something, except saving in having to do single tax return vs. previously three (PST was twice/yr for us), what are the savings are there for retailers?

[coxengines]

Here, we save the PST on business supplies (non-resale items). We also save 7% when we buy a company vehicle.

Nothing that amounts to 10% of course.

I believe that Pierre's SIL strategy was to simply capitalize on a perception and offer 10% savings in July. They eat the loss and gain customers. Buyers love to get a deal, especially in view of the hated HST.

Have you seen what happened in our Province (BC) re repealing the HST? 10%+ signatures in every riding. In our riding it was over 40%!

Bernie

[pierrelebel]

"except saving in having to do single tax return vs. previously three (PST was twice/yr for us), what are the savings are there for retailers?"

Businesses (including retailers) in ON and BC will experience substantial savings over time with HST.

For example, from July 1st, we will get back 100% of the PST we are currently paying on equipment such as computers, printers, etc..., supplies such as laser cartridges, envelopes, boxes, labels, office supplies, etc...

In other words, whatever PST expenses we had previously become ITCs (input tax credits) where we get 100% of it back.

It does add up.

If your business requires delivery vehicles, think of the PST savings on a van or truck! Thousands of dollars!

Of course, it does not add up to 10%. That was not the point. The 10% discount he offers only applies to one month (less than 1% for the year) to show customers savings are being passed along. It's marketing! 🙂

[dipmicro]

I see your point, although I am not as optimistic. My dentist will cost more and I cannot put it as business expense.

[pierrelebel]

Your dentist will cost more?

Why is that?

[pierrelebel]

On the subject of HST, make sure to claim your Small Business Transition Support Payment if your business is located in Ontario.

For more information, please check this http://www.rev.gov.on.ca/en/taxtips/hst/07.html

There is nothing wrong getting $1,000 from the government to help with the transition. 🙂

[dipmicro]

Your dentist will cost more?

Why is that?

You are right, dentist is not taxed. Cool ! I was posponing that visit and now wanted to do in in the next 2 weeks to save the tax, now that you mention dentist is not taxed, I can keep postponing :^O Can I assume optometrist checkup is also in the same group of "medical service" and is not taxed ?

[pierrelebel]

"Can I assume "

You do know the meantime of "assume", don't you? 😉

Never, ever, assume anything with taxes!

[axe_n_gear_music]

Re: Small Biz Transition Support Payment in Ontario:

Eligible businesses will qualify for a transition support payment of up to $1,000 as outlined in the following table:

Small Business Transition Support Total Quarterly Taxable Revenues Amount of Transition Support Payment
Up to and Including $15,000- = $300
Over $15,000 and Up to and Including $50,000 = 2% of Taxable Revenue for the Quarter
Over $50,000 and Up to and Including $500,000 =$1,000

So not all business in Ont. will get 1000, just like I dont get the 1000 personal HST credit because you dont get it if your annual household income is over $160,000.00......X-(

Cheers,
AXE

[pierrelebel]

Most real "businesses", including eBay's PowerSellers, do more than $50,000 annual volume.

If they do half that amount ($25,000), they still get $500.00

[axe_n_gear_music]

Thanks Pierre, I knew I could count on you to clarify that!
To be honest, I really didn't totally understand that part, so I'm glad to hear the correct interpretation.

Good news + Sunny Friday Afternoon = B-)

(Did I mention Corona with lime for everyone?!!).....and in my imaginary party, while I'm at it, I will mention that all you guys that have offered their wisdom on this board and have helped me so much lately, would be invited....I won't single all you guys out, but I'd like to send a special thank you out to Bernie who spent a great deal of time helping me with my business yesterday. You Bernie, get the best floating pool chair in the house with attached umbrella and cup holder (full of course!)

Cheers everyone,
AXE

[pierrelebel]

The federal government did something similar twenty years ago when the GST was introduced.

[threebears63]

Hi all,
We will continue to absorb the taxes. Since most of our sales are to the U.S. and international destinations it really doesn't cost that much for the Canadian sales we have.

We don't state anything in our listings regarding taxes, we just like all of our customers to feel that they are getting the same deal. The only one we tell about the taxes is the government at remittance time.

It will cost a bit more now, but we don't sell expensive items so it's not that big a deal for us. I can understand why anyone selling big ticket items does not include the taxes, the bite would be huge.

Whatever works for you.
Heather

[recped]

The federal government did something similar twenty years ago when the GST was introduced.

That's was incredibly lucrative, my transition cheque back then was just shy of six figures.

[pierrelebel]

"my transition cheque back then was just shy of six figures"

Tho "good old days"!

In 1991, I worked as a consultant for five days ($1,000 a day - that was a lot of money then) for a Toronto manufacturer/importer to smooth the transition from FST to GST and prepare the refund of FST (the old manufacturer's sales tax). That refund cheque came within four weeks and was well in the six figures. I earned my fee. 🙂

[coxengines]

You Bernie, get the best floating pool chair in the house with attached umbrella and cup holder (full of course!)

The brunette brings the refills, the dark haired one pushes the floating chair around, the red haired one dances and the blonde (my Xena) coordinates it all B-)

Bernie