OTTAWA — After more than 20 years in business, toy store owner Susie Pearson’s understanding of what counts as a child’s plaything has been thrown for a loop—by, of all players, the federal government.

Her shop on a trendy street outside of downtown Ottawa, Hintonburg Kids, is full to the rafters with plushies, books, baby dolls, arts and crafts, and baby-care items. 

When Prime Minister Justin Trudeau first announced a two-month GST holiday on essential goods, including kids toys and clothes, she assumed everything in her colourful shop would be tax-free.

“I thought it would be simpler than it’s turning out to be. It’s actually very complicated,” said Pearson.

As “It’s the Most Wonderful Time of the Year” plays over the store’s speakers, she scans the highly specific criteria released by the Canada Revenue Agency.

The picture books lining the colourful shelves at the front of the store? Tax-exempt. The colouring and sticker books next to them? Nope.

Fidget spinners and baby teethers? Still unclear.  

With some 10,000 unique items in her store, taking an inventory of what should and shouldn’t be taxed has proven impossible. 

The cost and headaches of navigating last-minute tax changes have come at the worst possible time for small businesses, landing in tandem with the punishing effects of the strike at Canada Post, said Dan Kelly, CEO of the Canadian Federation of Independent Business (CFIB). 

All this, he added, during a year when polls suggest consumer spending will be down. 

“Now we have new issues, like the ongoing Canada Post strike and the last minute tax change that the federal government has decided to grant, that are throwing further curve balls at small business owners at their very busiest time,” Kelly said.

The one-two punch will have a billion-dollar impact and is setting businesses up for potentially punishing audits if they interpret the government’s rules incorrectly, Kelly said. 

“This is going to be mass chaos and will take months and months to clean up after the holiday ends.” 

The CFIB estimates that the first two weeks of the postal strike have already set small businesses back at least $765 million. 

Even when it ends, Canada Post has warned it will take time to work through the backlog of parcel and mail deliveries. 

The Retail Council of Canada has asked Ottawa to step in to put a stop to the havoc the strike has wrought on the crucial holiday shopping season. While sympathetic, federal ministers say it’s up to the postal service and the union to figure it out. 

Meanwhile, some retailers and restaurants are forking over $1,000 to reprogram their tills to adjust to the government’s temporary tax measure, the CFIB’s Kelly said. 

That’s roughly how much William Chappell was quoted to temporarily adjust the point-of-sale software at his hobby shop across town. He’s come up with a workaround to avoid the cost, but there are other uncertainties. 

Debates about whether the model planes, trains, dollhouses and even robots that adorn his store are meant for kids or adults predate the government’s tax holiday. They’ve taken on new significance, though, as Chappell and his staff figure out how to classify the thousands of sets in stock. 

The last thing they want is to find out from the CRA that they got it wrong. 

“My sales have been down this year,” said Chappell, who has owned Hobby Centre since 1986.

“We’re hoping for a good Christmas, and that’ll kind of balance things out a bit and slingshot us into a new year. And then first you get the Canada Post strike, and then you get this thing going on. It’s like, ‘Oh man.’”

The goal of the tax break is to help middle-class Canadians buy the things they need and save a little for the things they want, Finance Minister Chrystia Freeland said Tuesday. 

The government understands the concerns entrepreneurs are feeling as a result, said Callie Franson, a spokesperson for Small Business Minister Rechie Valdez.

But on balance, she said, the GST holiday is a benefit to small businesses.

“Our government’s tax break is supporting our entire community by boosting neighborhood independent grocery stores, restaurants, retailers and small businesses that power our local economy,” she said in a statement. 

She suggested business owners call the CRA’s hotline if they have questions. 

The CFIB has instead asked the government to compensate businesses for extra costs they run up to get ready for the last-minute tax changes, and to show leniency to those that miss the mark.

“I’m not confident that a single retailer will be able to get this all right in the limited time that they have to put this in place,” the CFIB’s Kelly said.