The McGuinty government has proposed general transitional rules that would assist in the move to a Harmonized Sales Tax (HST).

These rules explain:

• which tax would apply for transactions that straddle July 1, 2010 - the current Retail Sales Tax (RST) or the Ontario portion of the HST,
• how the RST would wind down, and
• the special transitional rules that would apply.

Overall, the HST would apply to goods and services purchased on or after July 1, 2010. In addition, consistent with the approach used in the Atlantic provinces and Quebec, the HST would generally apply to prepayments starting on May 1, 2010, for goods or services that would be provided on or after July 1, 2010. This would create a level playing field for consumers and provide clarity for businesses as they transition to the HST.

The transitional rules include some key measures:

• Funeral services - The HST would not apply to funeral services where the contract is entered into before July 1, 2010.
• Transitional RST inventory rebate for residential contracts - A rebate would be available for RST embedded in construction materials purchased before July 1, 2010, but used in residential property contracts on or after July 1, 2010.
• Subscriptions to newspapers, magazines and other periodical publications - The HST would not apply to subscriptions paid before July 1, 2010.
• Passenger Transportation Services - The HST would generally not apply to round-trip journeys that commence before July 1, 2010.

Read the full description of the proposed transitional rules in the Information Notice: General Transitional Rules For Ontario HST, dated October 14, 2009, available at ontario.ca/taxchange.