The HST is Coming - and Sooner Than We Thought!

This will be one of the least cool blog posts ever to appear in this space, but the issue is important.

On July 1st, Ontario will combine the federal GST (5%) with the provincial PST (8%) resulting in the new HST (13%). This has a significant impact on our business.

We currently charge the 5% GST on everything we sell, and the 8% PST only on retail sales (food, drinks, T shirts, water bottles, chalk balls, and equipment rentals). When the HST takes effect, we will be required to charge the full 13% on everything.

The HST will drive up prices on a lot of things that consumers buy, including memberships in our gym. The government is offering some other tax credits to soften the blow this year. And the change is supposed to be good for business, as it allows us to deduct the HST we pay on things used for our business, an improvement over the current GST credits. In the long run that will lower the cost of doing business, allowing us to hold the line on price increases or hire more staff.

We chose to post our membership prices exclusive of taxes specifically to deal with the coming HST change. Some may ask why, if this change is good for our business, we don't just absorb the price increase. The answer is that the change comes too late for this business. A climbing gym involves an enormous initial investment, and then has moderate ongoing expenses. I will recover my start-up investment gradually over the next several years, but everything I spent to build the gym was without the benefit of the HST deduction that will be available starting in July.

Now on to the real point of this post. I just discovered that the impact of the HST actually begins well before July 1st. As of May1st, we are required to collect HST on a pro-rated basis for all memberships we sell that run past July 1st. We're working out the details of how to calculate this properly (the amount of HST will change each day from May 1st to July 1st!).

We had planned to have a "Beat the HST" promotion in June, making sure people knew to lock in their memberships before it takes effect. Now we realize that promotion needs to start immediately. Annual prepaid memberships bought on or before April 30th will still have only the GST applied. The 8% difference adds up to $41.60 on a regular annual membership, or almost a month of climbing. So if you are thinking about buying an annual membership, the best time to do so is this month!