If you have clients who own businesses on First Nations reserves, they may be liable for the First Nations Tax (FNT), which is a tax imposed on various products by some band councils. Sometimes the FNT uses another name, such as "community improvement fee," but in all cases, FNT must be charged and collected on the appropriate products, and you must file a Goods and Services Tax/Harmonized Sales Tax (GST/HST) return and pay the FNT at the required periods on your clients’ behalf.
Products and First Nations Where the FNT Applies
Several First Nations band councils, all of them in British Columbia, impose the FNT on alcoholic beverages, tobacco products, and fuel. The First Nations that impose this tax are:
- Tk’emiúps te Secwépemc
- Adams Lake
- Little Shuswap Lake
In addition, the Sliammon band council has imposed FNT on fuel and tobacco products but not on alcoholic beverages.
Charging and Collecting the FNT
The FNT is a 5% tax, equivalent to the GST and the federal portion of the HST. If your client is designated as a small supplier with revenues of under $30,000 per year, they do not have to register for the GST/HST, and they do not have to pay FNT. Otherwise, they do have to register and are liable to pay the FNT for all sales on reserves where the tax applies. If you’re working with a startup client, make sure they take care of GST/HST registration as part of launching their business, and point them in the direction of startup financing available to First Nations and Aboriginal businesses.
Your clients must charge FNT on all applicable, taxable sales (while continuing to charge GST/HST on similar sales throughout the rest of Canada). If your client buys a listed product (alcohol, fuel, and tobacco) outside the First Nations reserve but has it transported to the reserve by a vendor registered for GST/HST, then your client also has to charge FNT when selling the product. No GST/HST should be charged on any product that has FNT applied to it.
Your client should notify all customers that FNT is being charged on their receipts, invoices, or contracts. They can also post signs at their place of business to inform customers of the FNT, but they do not need to alter their invoicing systems or cash registers to differentiate FNT from GST/HST.
Reporting the FNT
Your clients who sell listed products on a First Nations reserve must file both their GST/HST return and a FNT schedule during every reporting period. You would report all collected FNT amounts when you file the GST/HST return for them, and make sure the GST/HST return also lists the FNT collected. All the same election forms and rebate applications can be used for both FNT and GST/HST purposes.
While you can file the GST/HST return electronically, that’s not yet possible with the FNT schedule. If you file electronically on your clients’ behalf, send the FNT schedule by mail at the same time (and by the due date). Otherwise, include the FNT schedule with the GST/HST return.
Understanding how the First Nations Tax works allows you to assist clients to handle what might be confusing to them so they can charge the tax correctly, collect it, and report and pay it properly according to Canada Revenue Agency requirements.