News that the federal government plans to eliminate the GST on everything from toys to Big Macs may come as blessing to consumers, but it is a double edged sword for merchants who must apply the changes.

The tax holiday is especially good news for those on a fixed income, seniors, and anyone else who is otherwise financially stressed at this time, but take a moment to consider the impact on merchants and especially small business owners.

First of all, the tax break only applies to the GST portion of HST in Ontario. The GST portion is five per cent, while the Ontario provincial sales tax makes up the other eight per cent. Fortunately, for consumers in the province the Ford government has decided to match the tax break on the same items that are not already PST exempt.

The two-month tax break, which will take effect on Dec. 14 and run until Feb. 15, 2025, covers dozens of items, including children’s clothes and toys, video games and consoles, Christmas trees, restaurant and catered meals, wine, beer, candy and snacks.

This is not only great news for consumers, it will also help the economy in general because most people will end up spending the money they save on other items, meaning the money will continue to circulate.

That may sound like good news for those businesses who deal in the items which will no longer be taxed, but there is a downside as well.

Businesses who charge HST must remit that money on a quarterly basis to Revenue Canada, but they are allowed to deduct the HST they spend on items used to carry out their day to day operations. It’s called an input tax credit or ITC. Examples of an ITC includes the HST on their utility bills, gas, and inventory.

With no HST on sales, there is nothing to apply their ITCs to, which means they have to eat that cost.

In some cases we’re talking hundreds of dollars in a lost tax credit at a time when many small businesses are struggling to make it through the current recession.

The hope is that the increased sales the HST holiday may create will somehow make up for the inability for businesses to lessen their own HST bill with the ITCs. Whether or not that will be the case remains to be seen.

In the meantime, here’s hoping that the tax holiday will encourage people to open their wallets and pocketbooks and spend more money. A lot of businesses in Orléans and especially restaurants have not had a particularly great year. Any additional sales the HST holiday may bring will be a blessing on its own.