TOP STORY
Last week, the Trudeau government successfully passed what they’re calling the “holiday tax break.” Starting Dec. 14, it’s a temporary GST holiday on a number of items closely associated with Christmas, such as children’s toys, beer and snack foods.
The specifics are also unbelievably complicated, vague and sometimes contradictory — leading to a nightmare for Canadian retailers forced to completely rejig their pricing inventories at what is already the busiest time of the year. In the words of economist Mike Moffatt, it’s “probably the worst tax policy in a decade.”
Below, a cursory guide to what is taxed, what’s not, and why none of it makes any sense.
Hockey cards are taxed, Pokemon cards are not
Purchase a card with Phil Esposito on it, and you pay GST. Purchase a card with Charizard on it, and you don’t. The reason why is that “card games” are subject to the tax break, but “collectibles that are not intended for play or learning” are not.
Pokemon trading cards can be used as part of a tabletop game, thus making them tax-exempt. But hockey cards are specifically mentioned as a product that will continue to be charged GST.
Dolls and figurines have also been plunged into a similar gray area. If it can be played with, it’s tax-free, if it’s meant to be looked at, it’s taxed — and the nation’s various toy and gift stores have just two more weeks to figure all that out.
Christmas trees are tax-free, but not the decorations
The tax break doesn’t kick in until Dec. 14, long past the time that most Canadian families have already purchased and decorated their Christmas trees. Nevertheless, “Christmas trees and similar decorative trees” are indeed in the guidelines, and that includes both artificial and natural trees.
But that’s the only seasonal decoration of any kind that gets mentioned. So lights, decorations, garlands — or, say, a menorah — are all taxed just the same as usual.
When is a Christmas tree no longer a Christmas tree? Is a moulded-plastic tree-shaped Christmas decoration taxed the same as a conical display platform intended to substitute for a Christmas tree? The Canada Revenue Agency doesn’t say.
Some Lego is covered, some is not
In a Saturday social media post, Dan Kelly, president of the Canadian Federation of Independent Businesses, featured an image of two types of Star Wars-themed Lego sets.
One was Boarding the Tantive IV, a 502-piece playset re-enacting the opening scene of the 1977 Star Wars film, in which antagonist Darth Vader boards a rebel spaceship known as the Tantive IV. The other was a 654-piece set depicting the Tantive IV itself.
The former will be tax-free, the latter will not. Why? Boarding the Tantive IV is marketed for children, but the Tantive IV is marketed for adults. Both sets are roughly the same level of complexity, but one is intended for playing, and the other is a “buildable model” intended for display. As such, the latter Lego set is technically “marketed for adults” and will still be hit with GST.
The Les Misérables soundtrack, but not the Les Misérables soundtrack
If you buy a CD or cassette of the original cast recording of Les Misérables, it should technically meet the cutoff for the GST tax break. The guidelines state that “physical recordings of a performance of a published play” do not have to pay the GST. Les Misérables is a “sung-through musical,” there’s no spoken dialogue — and thus the soundtrack constitutes a recording of the play’s full performance.
However, the GST tax break does not apply to “recordings of performances of musical scores.” So, if you buy a CD of Les Misérables: The Staged Concert, you’re presumably paying full freight. The recording features the exact same soundtrack, but in a concert setting, rather than as a performance.
Video game cartridges, but not a downloadable video game
Video game consoles, including the $960 Playstation 5 Pro, will be tax free, as it’s “designed primarily for playing video games.” The tax is also exempt on Playstation 5 games — but only if they’re purchased as physical discs. “Downloadable” or “online-only” games do not qualify.
This is despite the fact that up to 70 per cent of all console games are purchased via download, whether it’s for the Playstation, the Xbox, or the Nintendo Switch. And if you play video games on a computer that does other things — such as a laptop, phone or tablet — you’re paying full price in any circumstance. Even if you pretend that it’s the 1990s and go to a store and buy a PC game in physical disc form, Ottawa will still make pay you pay GST because the game is played on a regular computer instead of a “qualifying video game console.”
The tax break also has a pretty severe physical media bias when it comes to books. The guidelines specifically mention that if you can find an audiobook on “reel-to-reel tape,” you don’t have to pay GST on it. But anyone downloading their audiobooks like a normal person has to pay tax as normal.
Magazines are tax-free, but not magazines
Okay, this one’s very confusing. In the guidelines for “printed books,” magazines technically qualify as a book, and are thus subject to the GST break. However, they have to be delivered by subscription and they can’t feature advertising in “more than 5% of their printed space.”
But if you go to the guidelines about “printed newspapers,” consumers are specifically told that “magazines” and “periodicals” do not qualify for the exemption. Presumably, this means that a magazine might be tax-free, but a retailer risks getting into trouble if they classify it as a “newspaper” rather than a “book.”
Pyjamas that cause a child to resemble a cat are okay, but not an actual cat costume
Children’s clothing gets a pretty broad exemption. If it’s below a certain size it probably won’t be charged GST — although the guidelines are very uptight on special-purpose clothes. Tap shoes, ballet shoes and soccer cleats are all still subject to GST. And while you might be able to get away with not paying tax on a sports jersey or a tutu, the government requires you to ensure that it can “reasonably be worn outside of sports or dance activities.”
And costumes are banned from the tax break outright. So, if you’re buying your child onesie pyjamas that come complete with a tail, ears and other accoutrements to cause them to resemble a cat — that’s probably fine. But if you buy them a plush cat onesie that isn’t explicitly marketed as sleepwear, you pay GST.
Snacks are tax-free unless you get them from a vending machine
All kinds of food is GST-free under the tax break. Restaurant meals, deli platters, catering services, donuts, hot wings. Most of the junk food aisle will also be tax-free, including chips, candy and cookies.
But with one exception: Not if it’s “sold from a vending machine.” If you buy a bag of chips from a food truck, street vendor, depanneur, café, newsstand or cafeteria, it’s tax-free. But not a vending machine.
