06/06/2013 05:16 EDT | Updated 08/06/2013 05:12 EDT

Manitoba retail lobby group says its members are confused about sales tax

WINNIPEG - Some Manitoba store owners are confused about whether they should obey the government and start charging a higher provincial sales tax on July 1, the Retail Council of Canada said Thursday.

Spokesman Lanny McInnes said merchants face a tough choice —start charging the higher tax on schedule and refund customers if the tax is later quashed, or not charge the higher tax immediately and risk facing government penalties.

"We don't want to be put in a position where we have to choose one or the other. We want some clarity and we want some concrete guidance from the government," McInnes said.

The government tabled a bill in April to boost the sales tax to eight per cent from seven per cent on Canada Day. But the bill has been stalled by the Opposition Progressive Conservatives, who say it may be illegal.

Under the province's balanced budget law, a referendum must be held before any bill to boost the sales tax can even be introduced in the legislature. The government's legislation would do away with the referendum requirement and raise the tax simultaneously.

The Tories have managed to stall debate in the legislature to such an extent, the bill appears highly unlikely to be passed before July 1.

Government house leader Jennifer Howard said that doesn't matter, because governments of all stripes routinely raise gasoline, tobacco and other taxes on budget day and then take weeks to make it official.

"This is like every other tax that comes into effect," Howard said.

"This is the way Canadian governments operate."

The government has already directed retailers, through annual tax bulletins, to start charging the higher tax on schedule.

McInnes said there may be court challenges and the tax could be struck down. The Canadian Taxpayers Federation has mused about taking the government to court, although it has not made a decision.

Bryan Schwartz, a law professor at the University of Manitoba who specializes in legislative process, said in April that the government appeared to be contravening the balanced budget law by raising the tax without a referendum.

But he added the move would likely survive any court challenge because judges have ruled that governments are usually free to rewrite their own laws.