HST is Not Your Income – Don’t Eat the Tax!

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Based on recent member surveys, we have found that many of our members have some misconceptions about HST.

The RMTAO would like to remind RMTs to act as tax collectors for the government. Don’t eat the tax or consider the tax part of your income.

Some members have incorporated the tax into their fees instead of charging HST on top of their fees, which is referred to as “eating the tax.” Instead of being tax collectors for the government, these RMTs are choosing to essentially pay the tax on behalf on their patients. This causes those RMTs to take home significantly less money than they would otherwise.

For example, an RMT who lives in an area where most RMTs charge $100 would not charge $100 plus the $13.00 HST that the government would be owed. They would instead charge $100 including the HST and would actually take home $88.50 ($100 minus $11.50 in HST). These RMTs will have a significant reduction in income over the course of the year, while working just as hard as RMTs who act as tax collectors.

Most people are used to paying the added HST in most areas of their lives and would be unlikely to think twice about paying taxes for their massage therapy treatments as well. RMTs who “eat the tax” are making assumptions about their patients’ willingness and ability to pay the tax.

RMTs should not consider HST as something that negatively impacts their take-home pay. HST is not part of your income, it is simply a tax you collect and remit on behalf of the government. In fact, if massage therapy were to become tax exempt, there would be an increase in expenses for RMTs who use input tax credits. You can learn more in our article Impact of HST Exemption on RMTs.

When fighting for tax exemption, it’s important to focus on the fact that this will be beneficial for patients by making massage therapy more accessible. By not having the additional expense of the 13% tax on massage therapy, this will effectively reduce the cost of massage therapy for patients thus increasing the access to massage therapy. If massage therapy becomes tax exempt, you will be expected to remove the HST from your services. If you currently charge $100 including HST ($88.50 plus HST), you should not continue to charge $100 after tax exemption. This would not result in improved access to care.

Tax exemption will put massage therapy on a more equal playing field with all other health professions in Ontario. This is the strongest argument for tax exemption. Charging and remitting HST is only financially detrimental to RMTs if you eat the tax. When you act as a tax collector and take advantage of input tax credits, charging and remitting HST can be financially beneficial.

Although obtaining exemption from charging and remitting HST is popular among many RMTs, there are many reasons that an RMT would choose to become voluntarily HST-registered. RMTs do not have to register to collect and remit HST until they make $30,000 or more in four consecutive quarters but they might choose to register voluntarily for the following reasons:

  1. Many of the supplies and other fees you may need to purchase for your practice have HST added to them. If you are registered for HST, you can recover the HST you pay on any legitimate business expense using input tax credits.
  2. This would ensure equality among all RMTs in a clinic or area if they all charge HST and would help ensure patients are aware that massage therapy is not HST exempt and HST is applied to massage therapy.
  3. If you work under a split percentage arrangement and the clinic owner is HST registered, it would be finically advantageous to you to be HST-registered as well. This scenario is explained further in our guideline HST and Split Percentages.

For these reasons, the RMTAO recommends that all RMTs, even those who do not meet the threshold of $30,000 in four consecutive quarters, become HST-registered. Once you are HST-registered, you should ensure that you view yourself as a tax collector rather than viewing HST as part of your income or “eating the tax”. You should also consider listing your fees without HST, and stating that HST will be added to the fees, to make it even more clear that HST is applied to massage therapy.

For more information on HST and your massage therapy practice, members can review our HST Guideline for Ontario RMTs.

Tags: HST, split percentages, finances