Retail Sales Tax (RST) and Goods and Services Tax (GST)
Although brokerages are required to register and remit taxes as required to the appropriate government agency, the Retail Sales Tax (RST) and Goods and Services Tax (GST) are not within RIBO’s jurisdiction.
A brokerage’s net trust position would not be affected by the retail sales tax balance, however brokerages must be able to account for the retail sales tax to ensure that the retail sales tax assets and liabilities are properly reconciled.
The taxes can be paid/remitted from either the trust or general accounts of the brokerage. It is important to note that if the decision is made to pay the taxes from the general account, the payment amount must first be transferred from the trust account to the general account.
Some brokerages remit the taxes on invoiced premiums rather than paid premiums. Even though the taxes may not yet have been collected from the insureds, it is the easiest method to remit and account for the taxes since the balance in the account at any month-end should reflect what will be remitted the next month. When the taxes are remitted on invoiced premiums, the taxes are considered to be prepaid in accordance with the Treasurer of Ontario guidelines.
The Retail Sales Tax Act prohibits brokerages from rebating the sales tax or discounting a premium to be paid by paying the retail sales tax themselves, on behalf of a client. It is also considered an act of misconduct to directly or indirectly make or attempt to make an agreement as to the premium to be paid for a policy other than as set forth in the policy. This includes the payment of the sales tax by the brokerage and/or broker as an inducement to direct, control or secure general insurance business.
RST: https://www.ontario.ca/document/retail-sales-tax
GST website: http://www.ccra-adrc.gc.ca/tax/technical/gsthst-e.html
HST (Provincial Website): https://www.ontario.ca/document/harmonized-sales-tax-hst
HST (Federal Website): https://www.canada.ca/en/revenue-agency/services/tax