Looks like subscription sales will be hit with Ontario’s proposed new Harmonized Sales Tax after all. Despite some reports that newspaper and magazine subscriptions in Ontario may be exempt from the new HST, budget documents show that among print media, only books will remain exempt.

This means the 8% provincial retail sales tax, which currently does not apply to subscription sales in Ontario, will be added to those sales once HST comes into force in July 2010. Provincial tax already applies to single-copy sales.

This puts Ontario subscription sales on the same footing as those in Nova Scotia, New Brunswick and Newfoundland, which already have HST systems.

For most Ontario businesses, the HST will work like the GST, which means publishers will be able to claim an input tax credit for any HST they’ve paid on goods and services, such as printing. It appears this could save publishers’ money, since some costs now subject to the retail sales tax will be eligible for input tax credits.

The Ontario government is still working on technical details, but most of the rules regarding HST can be found on the government’s budget web site. It’s worth reading the rules carefully, since there are variations: for example, businesses with more than $10 million in annual revenue will not be able to claim input tax credits on certain costs such as telecommunication charges during a five-year transition period. Also, businesses with under $2 million in annual sales may be eligible for a transition credit of up to $1,000.

Other measures in the budget that may affect publishers include enhancements to the Interactive Digital Media Tax Credit program, and an accelerated write-off of 100% for computer and software purchases between January 2009 and February 2011, to match a similar federal program.

The budget still needs to be passed by the Ontario legislature, where the Liberals hold a majority.