Publishers need to be aware of sales tax changes in BC and PEI

Publishers of magazines in British Columbia and Prince Edward Island should be aware that sales tax rates are changing, effective April 1.

• BC is eliminating its 12% HST and replacing it with GST at 5% and PST at 7%.  cra-arc.gc.ca/E/pub/gi/notice276/notice276-e.pdf
• PEI is replacing GST of 5% and PST of 9% with HST of 14%.  http://www.gov.pe.ca/photos/original/hst_trans_rules.pdf

Ontario premier admits families will take a hit with the HST -- and so will their subscriptions

It turns out that critics of the HST haven't been crying wolf; in fact, the average family earning between $70,000 and $80,000 a year will pay $722 more a year, according to a story in the Ottawa Citizen. It was based on data commissioned and released by the Ontario New Democratic Party. 

The analysis, based on Statscan data, shows that the added burden of the new value-added tax will be between $4.7 million and $5.9 billion. 
Since some of the added burden on families includes 8% more for magazine subscriptions, which are discretionary, it seems highly likely that there will be a dampening effect on sub sales. It is no comfort that the Ontario premier Dalton McGuinty is now admitting this fact.

For some impenetrable reason Ontario decided to exempt newspapers from the 8% increase, even though magazines and newspapers are competitors in exactly the same business, with the same revenue sources (advertising and circulation).

Related posts:

• HST is not a new tax? Ask your subscribers
• What HST means to your magazine in ON and BC
• Newspapers, but not magazines, exempted from Ontario HST
• Ontario HST on magazines goes ahead, but subs prepaid before July 1, 2010 are exempt
• Ontario magazine publishers seem resigned to HST
• Harmonized Ontario tax confirmed; magazines to take a hit

HST is not a new tax? Ask your subscribers

It's curious, that Tony Wanless, a blogger for BC Business magazine's website, takes a poke at opponents of the HST and suggests that they're too thick to understand that it's not a new tax, but rather a simple blending of the old provincial retail tax and the goods and services tax that most people pay anyway. The reason it's curious is that, in BC (and Ontario) it IS a new tax on some goods -- 7% more in BC and 8% more in Ontario -- such as magazine subscriptions. No one knows what the eventual impact will be, but one rule of thumb is that an increase in out-of-pocket costs will inevitably result in an decrease in sales. We imagine the magazine that hosts him can ill afford such a revenue hit. (He seems to be fairly sanguine about the 7% tax increase on his consulting fees as CEO of Knowpreneur Consultants.)

What HST means to your magazine in ON and BC

Masthead magazine has published a succinct and useful Q & A summary of the looming impact, come July 1, of the imposition of the harmonized sales tax (HST)on magazines in B.C. and Ontario (where 2/3 of Canada's titles are published.)

Newspapers, but not magazines exempted from Ontario HST

[This post has been updated] The announcement by the government of Ontario on Thursday that it would now exempt newspaper subscriptions from the new 13% harmonized sales tax (HST) means that magazines are alone among print publications will face an effective 8% increase in taxation come June 2010. Or, to put it another way, magazine buyers will pay 13% tax (5% GST + 8% PST, combined) while newspaper buyers will pay no tax at all. 

"We're just gobsmacked," Mark Jamison, chief executive officer of Magazines Canada told the Toronto Star. "I'm quite certain that we will lose magazines. This will be the last straw. This came as a total shock because we made the same economic and cultural arguments ... as newspapers."

This decision is both arbitrary and profoundly unfair as well as crassly political. Newspapers compete in the same marketplace in Ontario for subscription and advertising revenue, and magazines are suffering the same economic impacts from the recession as newspapers. This  seems to have made no difference. 

[Update: Premier Dalton McGuinty said today that there will be no more exemptions and that "we have all but nailed this down".]

The decision was designed to curry favour with the voters in the Tim Hortons across the country, freeing up their morning coffee and single copy newspaper purchases from tax. It will have much wider implications, since it apparently applies to home-delivered newspaper subscriptions as well. 

So we have the prospect of enormous chain monopolies such as CanWest, Quebecor and Torstar (who account for most of the daily and community newspapers in Canada) being given tax relief while magazines (some from large companies, but many, many of which are small, independents) are  hit hard. 
It only rubs salt in the wound that the spokesman for newspapers preened: "It's a really good example of government listening."

As far as we can see, it is selective listening at best. What possible justification can it be to exempt newspapers and not exempt magazines? Every publisher of every little magazine, large and small, needs to get on the phone right now to Queen's Park and their MPP and demand that this anomaly be made right.

Related posts:

• Ontario HST on magazines goes ahead, but subs prepaid before July 1, 2010 are exempt
• Ontario magazine publishers seem resigned to HST
• Harmonized Ontario tax confirmed; magazines to take a hit

Ontario HST on magazines goes ahead, but subs prepaid before July 1, 2010 are exempt

Ontario has released information on the transitional rules concerning the new harmonized sales tax and, as expected (or feared), there is no exemption for magazines. As of July 1, 2010, the cost to consumers of single copies and subscriptions will go to 13% as the new tax blends the provincial retail sales tax (PST) of 8% and the federal goods and services tax (GST) of 5%. That's the bad news.

The good news is that the province will not apply the tax to prepaid subscriptions, as it had previously planned to do. This is the result of some considerable lobbying by Magazines Ontario. So magazines should be thinking of a major circulation drive in advance of July 1 2010 with the pitch to consumers that by buying now, they'll save themselves the equivalent of $2.40 on an annual $30 subscription. Even better if they can be convinced to buy 2- or 3-year, or even lifetime, subs.

"Harmonization" of Ontario sales tax will wallop magazines

[This post has been updated]Today's likely announcement in the Ontario budget of "harmonization" of its provincial sales tax (8%) with the federal goods and services tax (5%), will have a major impact on magazines sold in the province. It means that the provincial sales tax portion, never before paid on magazinesmagazine subscriptions, will now apply.

In effect, the decision will automatically add 8% to the out-of-pocket costs of magazine buyerssubscribers in a province where more than half of Canadian magazines are sold.

Though the Ontario government has tried to mitigate public anger by exempting a number of basic goods, including children's clothing, diapers and new homes costing less than $400,000, it is likely that the implementation of a provincial tax never before paid on magazine purchasessubscriptions (PST is already applied to single copy sales at the checkout) will result in an unknown loss of sales subscription income. (The government is also trying to soften the blow by giving families $1,000 over the first year to adjust to the new regime.)

Still, there is no way of getting around the fact that, for the average magazine buyer or subscriber, their costs are going up 8% and some of them will buy fewer magazines. Common wisdom in the industry is that for every percentage point increase in price, there is a 1% decrease in sales.