St. Catharines and Area Arts Council

Tax Information for artists:

On behalf of visual artists, we [AFAC] have been talking with senior advisors in the Ontario Ministry of Revenue about taxes including the new HST which is due to come into effect on 1st July this year and its effect on artists.

AFAC will be sending the Ministry of Revenue a letter requesting that the tax collection threshold of annual sales for artists be raised from the current $30,000 to at least $50,000 to reduce the number of artists who may have to deal with this paperwork.

The following is useful information for artists, which is offered as information, not legal advice.

Ontario Retail Sales Tax [RST]:
Under the current provincial RST, Purchase Exemption Certificates [PECs] are completed by persons entitled to claim an exemption on the purchase of taxable goods and services. Examples are goods for the purpose of resale or a manufacturer buying production equipment. Artists may buy exempt from RST items that are incorporated into “works of art” for sale such as paint, canvas, wood, pottery clay and like materials by issuing valid PECs to their suppliers. An artist who creates “works of art” is not considered to be a manufacturer for retail sales tax purposes and is not eligible for the exemption for production equipment and processing materials. Therefore, artists must pay RST on their purchases of items such as brushes, easels, lighting equipment, etc. Artists must also pay RST on other items such as computers, office supplies, furniture, telecommunications, etc. used in the course of their business. Artists are required to charge, collect and remit RST on sales of works of art unless the purchaser is entitled to a conditional exemption.

From 1st July – the Harmonized Sales Tax [HST]:
The HST combines the existing 5% GST and the ‘old’ 8% RST into a new tax.
Registered businesses selling taxable or zero-rated goods and services will be able claim input tax credits [ITCs] on their purchases, as under the federal GST, with limited exceptions. These credits would reimburse businesses for the tax they pay in the course of commercial activities. This approach would reduce business costs, most noticeably in sectors that use inputs that are taxable under the current RST system, and would support business investment. Artists with sales under $30,000 per year [small supplier] will not be required to register for the HST. They will not have to collect the HST on their sales but will not be entitled to ITCs on their purchases. An artist who is a small supplier may voluntarily choose to register for the HST. In this case, an artist would collect HST on its sales and pay HST on its inputs. However, the artist would be entitled to claim an ITC on purchases of items used in his/her commercial activities such as paint, canvas, wood, pottery clay, brushes, easels, lighting equipment, computers, office supplies, furniture, telecommunications, etc.

Summary:
Artists can use Purchase Exemption Certificates [PECs] to be exempt from paying RST on items that go into the finished art [like paint, canvas] although they must pay tax on items like easels and brushes that are used in the process of making the art. Artists must charge RST unless the buyer is exempt from paying RST.

Under HST artists with sales less than $30,000 per year need to decide whether it is a good idea for them to register for the HST [they do not have to].

Artists with sales over $30,000 should keep their receipts for all goods and services bought and invoices for all work sold to claim back the tax paid against the tax collected on their sales of art.

Please go to our web site at www.artforallcanada.org, for more detailed information – click “In the News”.

If you have any constructive suggestions about this tax topic, please let me know.

Yours in art,

Sheila J. Mitchell
Executive Director,
Art For All Canada, Inc.
Tel: [416]-756-3221
sheila@artforallcanada.org