An upcoming federal tax break has led to frustration among some Toronto small businesses who says its created confusion and hours of extra work during their busiest time of the year.
Christina Kotiadis said the GST holiday has created a logistical nightmare her small business, Lemon & Lavender, a gift store located in Toronto’s Bloor West Village.
A new mother with a four-month-old son, Kotiadis said she’s supposed to be on maternity leave but had to come back to work to edit the barcodes for more than 30,000 products in her inventory.
“Unfortunately, this has taken a lot of time away from my son as I’ve had to basically edit products with him in one hand or pass him off to somebody else in order for me to get this into fruition in time,” she said.
“Because we do have a deadline and I have to meet that deadline. This isn’t an optional policy, this is a mandate.”
If approved in the Senate, the GST exemption will start on Dec. 14 and will run through Feb. 15, 2025.
Under the exemption, essentially all foods in Canada will be tax-free.
It also applies to:
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Children’s clothing and footwear, car seats and diapers.
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Children’s toys, such as board games, dolls and video game consoles.
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Books, print newspapers and puzzles for all ages.
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Christmas trees.
The federal government has said the tax holiday is meant help alleviate some of the economic pressures Canadians have been experiencing in the post-COVID era.
Confusion over rules
Kotiadis said the wording of the exemptions is confusing and has made it difficult to determine whether or not some products should be tax-free or not.
For example, Kotiadis said some toys are meant to be for children, while others are collectors items for adults.
“I fear that there will be a lot of confusion both in the store at the desk between the consumer and us,” she said.
“And I think that that’s going to open us up to a lot of scrutiny that we didn’t even put on ourselves.”
The impending tax holiday is creating similar headaches for Megan Munro, owner of Caribou Gifts.
Munro said her and her staff are doing the best they can to get prepared ahead of the fast approaching deadline, but she worries there will be mistakes.
“A lot of the things we sell are like 8+, but adults could play them. Does that count? Does that not count?,” she said.
“There’s not a ton of guidance right now.”
Both Munro and Kotiadis said they’re in favour of helping their customers save money, but are concerned with how the tax break is being implemented.
WATCH | Businesses scramble to prepare for GST holiday:
The federal government’s decision to temporarily eliminate the GST on some goods is meant to give Canadians who are struggling a break. While it’s expected to boost sales for small businesses, some say the headache to implement the change isn’t worth it. CBC’s Dale Manucdoc has the story.
Dan Kelly, the president and CEO of the Canadian Federation of Independent Business, said he’s had business owners call him in tears while trying to sort out which of their products are taxable and which ones aren’t.
He said his association spent 10 days trying to track down an answer for a hobby store owner about how to categorize materials used to make a model airplane.
“These are decisions that small business owners have never had to make before and they have to put this all in place in two weeks at their busiest season.”
There’s also concern over what the GST break will mean for returns. Kelly said merchants may end up losing money if customers return items they bought using a credit card before Dec. 14 only to repurchase them during the tax break.
That’s because merchants pay fees for each credit card sale, Kelly explained.
“If you return it, they pay another fee to the credit card company, and then if you re-buy it, they have to pay it a third time,” he said.
“So a small business, if somebody returns things to repurchase them to save the GST, the small business might have actually spent more in the credit card charges to make that happen than the profit on that item for their business.”
A recent online survey of small business owners conducted by CFIB found that only four per cent of respondents said they expect stronger sales because of the tax break.
On top of that, these businesses will have to redo all of this work in February once the tax holiday is over, he said.
“You know, consumers having more disposable income is always a good thing for small businesses. But we’ve chosen the most crazy and convoluted way of doing this,” he said.
The House of Commons passed legislation to implement the GST holiday last week. It is now before the Senate.