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Discussion Starter · #1 ·
I just got back from my homebuilders meeting , the topic tonight was the impending harmonization of the g.s.t. and p.s.t. (goods and service tax and provincal sales tax). For most of my work it means that my customers will get an increase of 8% :furious:. The government officials are marketing it as a neutral tax change. Bottom line, the information I am getting is that the changes are going to make it harder to land jobs in Ontario. The guy with the pick up and a ladder no insurance will get more of our market share:censored:. Just wanted to hear what you guys had to say about it. Thanks Chad
 

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more tax... more paperwork = less jobs to a degree and more money out of pocket for us to be tax collectors for the Canadian Gov.............. it`s total :censored: nobody wants the extra headache that this brings
 

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When the GST came in in 1990, it was supposed to benefit us all.
In my case, all of a sudden my customers did not want to pay the GST. Thy all asked me to take cash and not charge tax. Instantly, the black market doubled or more likely tripled in size.
almost 20 years later, at least 2/3 of my customers offer cash if I don't charge GST. That is at a rate of 5%.
Next July, when it goes to 13%, I can just imagine how much business I'm going to lose to the "tailgaters". I am seriously wondering if I am going to stay in business.

Gonna be fun.
 

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I think that the harmonized sales tax is going to put alot of strain on many businesses. I know right now many people bring up the cash idea when pricing jobs, and all the cowboys and pickup hacks are going to get more work and screw all the legit contractors. then again maybe when they screw up all of us might get the work to fix it. Anyways i was planning on heading out on my own in the next few years and hopefully people have accepted the new harmonized tax or else i think it will be harder to go on my own.
 

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I do agree that this blended tax increase will likely be a driving force in even more underground business. The gov. likes to call it a value added tax - yeah more value for them !

I have a feeling that the present Home Renovation Tax Credit program that the feds are doing will be rolled out again due to the true economy has not gotten any better - too soon, so extend the program. Also it would be a political whim for the conservatives because the liberals will be on their coattails again with the threat of an election again next year.

What will this additional tax increase do? They say that it will reduce costs for the retail sector and thus merchandise will be lowered to follow suit. Bull I say since the retail sector is fragile as it is with low profit margins. So any cost reduction will be obsorbed by Mr. Retail to boost those low margins.

Where will this lead us? No idea, but as business folk we have to pull a rabbit out of the hat and find solutions to attract the client. We can't fight it - it would be like complaining to no end about the price of gas.

Be ready to wear your business hat on straight and make it work for yourself and your future clients.
 

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I 100% agree that the underground economy is going to benefit, but, to say that the blended tax is going to add 8% to the total is a little distorted.

As most of you know, if materials and fixtures are being installed into a home they are considered "real property" and as a contractor, I pay the 8% PST when I purchase the materials. The homeowner should not see a line on any contractors invoice for PST. I pay it and add it onto the cost of the materials and it is blended in. The only "tax" customers should see on their invoices is 5% GST
Basically, PST is only applicable to materials

In the new and :shutup::shutup:"improved":shutup::shutup: system, there will be no 8% PST hidden in the costs. The problem is that now customers are paying an extra 8% on the labour portion of the invoice.

If you do a $10,000.00 job and your material costs are $5000.00, your customer is going to pay an additional $400.00.

As for prices coming down as it will be "cheaper" for business's to figure out there taxes, we all know that is crap.

Think back to when the GST came into effect. Before the GST there existed a Federal Manufacturing tax that was (I think) 12%. This was paid by manufacture's and importers and was another "hidden" tax.
When the 7% GST came into effect I dealt with about 30 vendors. One out of 30 actually reduced their prices, the other 29 - well, they had a healthy price increase because of the govenment and didn't even have to print new price books!

Bottom line (IMO)

Is an extra $400.00 on a $10K job going to implode the industry?? I think everyone will do the same thing they did when the GST came into effect - they will market "NO TAX" for a year or so, then go back to normal (whatever that is!)
 

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The thought occured to me that if I am collecting the pst and gst (with no reimbursement for this) am I not in effect an employee of the government and therefore entitled to benefits, etc.

I know there is no way, but was an interesting angle on it. Wonder what they would say if I asked.

As far as the added tax, ya, it's gonna hurt us. That means 8% pst, 5% gst, 11-12% workers comp. So basically 25% right on top of employee wages. Plus the regular deduction costs.

The tailgaters are going to kill us. :censored:
 

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I 100% agree that the underground economy is going to benefit, but, to say that the blended tax is going to add 8% to the total is a little distorted.
That all makes sense, but it's the optics that hurt. That big 13% number that the customer sees at the bottom overides any logical explanation.
 

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In two years on my own, I've had one customer ask about paying cash and avoiding GST, I said no and they were perfectly happy to go the legit route.

Stone, when you say 2/3 offer cash for no GST, do 2/3 run away when you tell them you have to charge it or do they pay anyway?
They all ask. I do not do cash, however, as it's too easy to get caught. A few times, I have offered to include the GST, but I do not do contracts under the table. My ex partner loves that, He used to sell more than half his contracts that way. I don't know if he still does, but a leopard doesn't change his stripes.

Looking at the numbers:
Hypothetical case:

Current material cost $4000
8% Provincial tax (PST $320 (payable at source; considered to be a cost)
Labour $2500
Total cost of job $6820
50% markup $3410
Total price $10,230 (if you can get it)
5% GST $511.50

Total sale price $10,741.50

After the HST comes in

Material $4000
Labour $2500
markup $3250
Total price $9750.00
13% tax $1276.50
Total sale price $11,017.50

so the net result is that my margin drops $160 but the sale price goes up $276.00

Now, if I' working for cash:
Material $4000
tax on [email protected] 13% $520
Labour $2500
total $7020
50% markup $3510
Total sale price $10, 530. This is $500 less than I have to charge. Typically, the tailgater will charge a little less on labour, and usually puts little or no markup on. Conceivably I could get beat out by a couple of thousand dollars.


I just did the math now for the first time. This is horrifying for us legitimate contractors. I think I should maybe line up another job right now.
 

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Total price $9750.00
13% tax $1276.50
Total sale price $11,017.50

.
That's the killer right there. A customers eyes are attracted to that like a moth to a flame. When the quote goes out, you can bet your life the first thing that goes through the HO's is mind is, "screw that I'm paying cash".

It ain't gonna be easy. And when you factor in this years HRTC credit it's even worse.

This year:

Total Price $10,000
Add 5% GST $500
Minus HRTC Credit $1350

Total sale Price $9150.00


Next year:

Total Price $10,000
Add 13% $1,300

Total sale price $11,300

That's a 24% increase year over year.
 

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Workin' Hard & Havin' Fun
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Huh... so as I'm sitting here dreading the future tax increases we will face to pay for out crazy government spending, and how I'm going to make it all work...

you fine folks up north are 1-2 steps ahead of us, and doing the same thing...

No answers here from me, just an observation.

So.. what IS a good country to work in, with a limited government-mandated overhead?

~Matt
 

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bathroom guru
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Huh... so as I'm sitting here dreading the future tax increases we will face to pay for out crazy government spending, and how I'm going to make it all work...

you fine folks up north are 1-2 steps ahead of us, and doing the same thing...

No answers here from me, just an observation.

So.. what IS a good country to work in, with a limited government-mandated overhead?

~Matt

The United Arab Emarites!!
My sister and brother-in-law live there - making huge cash (in US $$) - NO TAXES
 

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Discussion Starter · #20 ·
let me pose a question from Kansas. What do we do, all of us about the lowball hacks or tailgate cowboys? What can we do about them?
We will never get rid of them, because people are all looking for the best deal! Some are bright enough to see that if they hire a hack they are going to get:censored:..it work. But we will always have the customer that wants to take advantage of the economy so that they can brag in the office or the factory what a deal they got by getting one over on their contractor. Everyone already "knows" that we all make a killing? Or at least thats the perception out there! Had a guy about a month ago ask me what my profit was on the basement reno that I quoted? WTF? That customer was an old client, told me what they were prepared to spend on the reno before we priced it. I got close but couldn't get under their budget and still make $$$ still haven't heard back from them. :sad:
 
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