What you need to know about the holiday tax break in Ontario

People make their way past a display of Christmas lights in the shape of a present during the holiday season in Ottawa on Tuesday, Dec. 19, 2023. THE CANADIAN PRESS/Sean Kilpatrick

The GST/HST tax breaks go into effect on Saturday, meaning Ontarians can save up to 13 per cent on some items.

The tax break is proving to be challenging for many retailers who must reprogram their cash machines before then, and also, for some consumers who are still unsure what the rules are when it comes to the two-month tax holiday.

The Retail Council of Canada (RCC) said that, for some stores across the country, re-programming their point-of-sale machines has been a hassle.

“It is a headache, and we are hearing from a lot of retailers across Canada,” Matt Poirier, vice president of federal government relations with RCC, told CTV News Toronto.

While businesses overall view the tax holiday as positive, Poirier said many feel rushed getting ready to implement the tax break. Additionally, Poirier said there are concerns that several shoppers still aren’t sure what’s included in the tax break and what isn’t.

“We expect consumers to be confused or frustrated and we are getting ready for that,” Poirier said.

The GST is five per cent while the provincial sales tax in Ontario is eight per cent, so the combined harmonized sales tax is being waived from Dec. 14 to Feb. 15.

Items that will be exempt from taxes include prepared foods, restaurant meals, some snacks, beer, wine, cider and alcoholic beverages below seven per cent alcohol. It also includes children’s clothing, footwear, car seats and diapers, some children’s toys, board games, dolls, and video game consoles, as well as newspapers, books, and Christmas trees (both real and artificial).

“Is it going to save the holiday shopping season? No, but it will help some sectors and consumers,” retail analyst Bruce Winder said.

Winder said that shoppers need to educate themselves on the tax break to avoid chaos at the checkout counter.

“There is also going to be confusion. They’re going to be saying, ‘Why am I paying HST?’ These are conversations that will happen, and it will be a bit of a nightmare at the cash register,” said Winder.

A survey by Field Agent Canada found that 54 per cent believe the tax holiday is a good idea, 44 per cent say it will impact their finances and 49 per cent planned to delay some spending until Saturday.

Jeff Doucette is with the market research company and said that while not everyone is embracing the tax holiday as a major event, for some families it will make a difference.

“There are a lot of Canadian families struggling paycheque to paycheque and they may only save $20 on a toy, but that $20 may be a big piece of their budget,” said Doucette.

RCC said the tax break may also help stores during the months of January and February, which are traditionally slower months for retail sales.

Shoppers don’t need to do anything to claim the tax break on approved items as it will be applied at the checkout counter.

The tax holiday is expected to cost the federal government about $1.6 billion and could cost Ontario $1 billion in lost revenue.