Professional real estate services are a ‘service’ like any other: the commission you pay to the service provider is subject to HST. This may seem obvious to some people, but I have been surprised a couple of times over the years to find that some folks didn’t realize that. Of course, we can usually review the facts in a simple, straight-forward conversation, but I think it’s important enough to mention here.
When I first started in real estate in 2001 my services were subject to just the 7% GST (which declined over time to 5%). The old Province of Ontario sales tax didn’t apply. However, when the taxes were merged into the HST, the rate went to 13%. Please note that in this example the tax applies not to the sale price of the house/condo, but rather to the commission paid for representation by a Realtor.
For example, in the case of a sale price of $400,000, a seller with an industry-standard 5% commission contract with her Realtor will pay $20,000 to the listing Brokerage (which will typically pay half of that amount to the co-operating Brokerage that represented the buyer). It’s that $20,000 that is subject to the HST. In this example, the seller has to pay $2,600 HST. The listing Brokerage collects that amount in trust for the Realtor, who then files with CRA and remits his taxes directly to CRA. (As a ‘small business’, I have an HST account, and can claim back some of the HST that I pay out during the course of my business. However, the rest goes to CRA.)
This is all separate from the HST that is payable on new construction. That HST is charged on the value of the new home, and is often built-in to the list price. Some of it is rebated to first-time buyers.
Here’s a bit more information about the HST in Ontario. If you have any questions about HST charged on real estate services, please do feel free to contact me. Either way, don’t forget that you will have to pay HST on the commission you pay your Realtor. 🙂