Know the Risk: HST and Short-Term Rental Property Vendors

Has the residential property being sold by your client been used as a short-term rental property?

We are writing about a HST issue that impacts your residential property vendor clients.

If the residential property your client is selling was used as a short-term rental property, then according to the decision in 1351231 Ontario Inc. v. The King, 2024 TCC 37 (CanLii) (under appeal), the sale of that property may be taxable for HST. If the appeal is dismissed, your vendor clients may be liable for HST when they sell what is found to be a non-exempt residential property.

As to what is considered non-exempt residential property, the Court reviews various provisions of the Excise Tax Act, provisions that have been in place for some time.

Accordingly, and at least until the appeal is decided, when acting for any client selling a residential property, you should ask if the property was used as a short-term rental property. If the answer is yes, your vendor client should then be advised that they may be liable for HST on the sale.