One of the best places to begin your search for tax savings and refunds is to do a deep dive into your own general ledger. Most services and property sold or leased by charities are exempt from GST/HST, meaning that charities do not need to collect tax on those revenues. Many charities have the false impression that they are not able to claim refunds of the GST/HST paid on purchases that support these sales and leases. However, these exemptions do not limit charities from recovering a portion of the GST/HST incurred on inputs to generate those revenues as charities are generally eligible to recover Public Service Body (PSB) rebates of a portion of the GST/HST incurred on purchases.
In one example, a charity that makes a $5,000 purchase and incurs $250 of GST should be eligible for a 50% PSB rebate of $125. Quebec Sales Tax (QST) rebates are also available, and PSB rebates in harmonized provinces such as Ontario provide additional recoveries. As a second example, a charity that incurred $5,000 in Ontario and paid $650 of 13% HST may receive a rebate of $453—which is a combined 50% federal GST rebate and 82% rebate of the Ontario provincial portion of HST.
Rebates on many purchases can be missed during the accounting entry process. These amounts can add up over time and may eventually become statute barred. Additional rebate amounts may be available in certain circumstances, such as property purchased and then exported out of Canada. A charity's eligibility for a rebate can be subject to many nuances—it is important to ensure the rules are understood and all rebates are recovered.