People shop at a Walmart in Vaughan, Ont., during sensory hours, which are select hours that accommodate people who want a quieter shopping experience, on Wednesday, July 2, 2024. Retail organizations are applauding a move to temporarily stop charging the federal sales tax on many items, but say the decision means some businesses have their work cut out for them. THE CANADIAN PRESS/Christopher Katsarov
Retailers are gearing up for a temporary suspension of the federal sales tax on select items, a move they see as promising but also challenging to implement. While the tax break is expected to boost sales, businesses are scrambling to prepare for the changes in a tight timeframe.
Starting December 14, the federal government will suspend GST charges on a variety of goods, including toys, groceries, books, diapers, and bottled water, until February 15. The extensive list of qualifying items has retailers and restaurants assessing their inventory and updating their systems to ensure compliance.
“Every retailer’s situation is different,” said Matt Poirier, vice-president of federal government relations at the Retail Council of Canada. “For some, this will be a quick adjustment, but for others, it could be a significant task.” Businesses will need to identify eligible products and update their point-of-sale systems to apply the tax exemption.
Small and medium-sized businesses may find the changes especially challenging, said John Oakey, vice-president of taxation at Chartered Professional Accountants of Canada. “While consumers will benefit, the burden of implementation falls on retailers,” he added.
Some companies providing point-of-sale software, like Lightspeed Commerce, described the updates as straightforward, noting that their systems already allow tax adjustments for specific items. However, payment solutions provider Moneris cautioned that the short timeline might cause added stress for businesses, particularly those with more complex systems.
Dan Kelly, president of the Canadian Federation of Independent Business, pointed out that the quick turnaround—just three weeks to implement the changes—poses logistical challenges. Retailers will also need to reverse the adjustments after two months, adding another layer of complexity.
The timing of the GST pause, starting just as the holiday shopping season slows down, has drawn mixed reactions. While some retailers worry that shoppers may delay purchases until the tax break begins, others see January and February as an ideal time to boost sales during traditionally slow periods.
Max Roy, vice-president of federal and Quebec affairs at Restaurants Canada, expressed optimism. “This comes at a time when restaurant traffic typically dips, so it’s actually well-timed,” he said, estimating a potential five percent sales increase. For smaller restaurants, the adjustments might take just a few hours, while larger chains may face more extensive work.
Despite the challenges, many in the retail and restaurant sectors believe the benefits will outweigh the headaches, as the tax break could encourage consumer spending during the quieter months.
