PST shift sparks confusion for retailers

Small business owners say they are struggling to administer Manitoba’s new law that removes the PST from some takeout meals and snacks as of July 1.

“Removing the PST from grocery items isn’t necessarily as simple as flipping a switch,” said Brianna Solberg of the Canadian Federation of Independent Business.

“Many grocery stores, convenience stores, and other retailers will need to review thousands of products and update their point-of-sale systems to ensure the correct tax treatment is applied,” she said.

On Monday, the NDP government’s budget bill received royal assent. It removes the seven per cent PST on all currently taxed prepared meals, snacks and soft drinks sold at grocery and convenience stores in Manitoba, starting Canada Day.

“We haven’t been given proper identification of what is included or excluded in this grocery store,” Munther Zeid, owner of Winnipeg Food Fare stores, said Wednesday.

“We’re still waiting,” Zeid said.

On Tuesday, a government spokesperson said the province is in regular contact with businesses and has posted instructions online.

“If there is a situation where a business has not made the change and the province discovers it (or is notified by taxpayers), tax officers will contact the business to ensure the changes are made,” he said in an email.

He provided an updated Manitoba Finance bulletin listing the food and beverage items that will no longer be taxed starting July 1, and where the provincial sales tax will remain in effect.

“The guidance released (Tuesday) is a helpful first step, and it does provide some direction on which grocery items will be exempt from PST as of July 1,” said Solberg whose federation advocates for small businesses in Canada and has 103,000 members.

Retailers are still working through practical questions about system changes, product-level coding, and how different charges are treated at the point of sale, she said.

“Things like environmental levies, bundled items, and how exemptions are applied in real-world transactions will require very clear, detailed instructions well ahead of the deadline,” she said.

Zeid said his stores use a point-of-sale system that can easily remove the PST — once they know the specifics of what will be exempt.

“With the current system we have, it’s a very simple thing, but again, we need to identify the categories,” the grocer said.

“Is pet food included? … Are all drinks regardless of size included? You know how when you buy one doughnut, you pay taxes, but if you buy six doughnuts or more, you don’t? Now do you have to pay tax for just one?”

Solberg said business owners will look for more technical guidance to ensure they can make the necessary updates in time and avoid non-compliance issues when the change takes effect.

“If a beverage becomes PST-exempt, does PST still apply to any separate environmental levy?” she asked. “If a levy remains taxable, how should it be programmed in (point of sale) systems? Are bottle deposits or recycling fees unaffected?”

She said those kinds of details are needed before July 1 to correctly reprogram thousands of stock-keeping units with unique, alphanumeric codes that businesses assign to products to track inventory, sales, and product variations.

If a grocery item becomes PST-exempt, then PST would no longer apply to the product and, in most cases, that would also mean it wouldn’t extend to any related non-refundable levies tied to that product, Solberg said.

She said Manitoba has not yet spelled out whether the environmental fee treatment will change alongside the grocery exemption, which is why retailers have flagged implementation gaps.

Governments rely on small business owners to implement tax changes, collect taxes, and update systems, all at their own expense, Solberg noted. The sooner the government provides proper, detailed guidance, the smoother the transition will be for retailers and consumers, she said before meeting Wednesday with Business, Mining and Job Creation Minister Jamie Moses.

Manitoba decided not to remove the PST from takeout foods sold by restaurants, bakeries, food courts, coffee shops, cafeterias, concession stands, food trucks, and similar operators. The exclusion is another issue that’s been raised by the business community.

On July 1, a box of five doughnuts purchased at a grocery store will be PST-exempt, while that same box purchased at a bakery will still be taxed, Solberg said.

“That creates a clear imbalance and is especially difficult for small, independent operators already facing soft consumer demand,” she said.

Restaurants Canada said Wednesday it was offered a meeting with a cabinet minister after Premier Wab Kinew refused to meet with them last month.

Progressive Conservative Leader Obby Khan called that “another misstep” by the premier.

He said Kinew announced Manitoba would remove the PST from prepared meals and snacks without adequate consultation and preparation.

“The government has not done the work,” said Khan, whose Tories called for income tax changes that would save a two-income family $1,000 a year. A family of four is expected to save $100 a year with the July 1 PST removal.

“The reality is this isn’t going to make life any more affordable for Manitobans and the premier refuses to listen,” Khan said.

carol.sanders@freepress.mb.ca