TORONTO - Remembrance Day poppies and wreaths will be exempt from Ontario's new harmonized sales tax.

Ontario Finance Minister Dwight Duncan announced Wednesday the province would move to axe the provincial portion of the tax, while federal counterpart Jim Flaherty will announce the removal of the federal portion Thursday, at a Legion branch in suburban Ottawa with Defence Minister Peter MacKay.

Poppies have been subject to the GST since the mid-1990s when the Royal Canadian Legion began purchasing them from a private manufacturer. Prior to that time, they were produced tax-free in sheltered Vetcraft Shops.

The sales tax was applied to the purchase price paid by the legions.

The new HST, which came into effect July 1, adds the 8% provincial sales tax to almost everything that was previously subject to the GST, including poppies.

The provincial portion of the new HST on poppies and wreaths would cost the legions an estimated $80,000, cutting into the proceeds of their fundraising efforts.

Duncan wrote a letter Friday to Larry Murray, grand president of the Royal Canadian Legion, promising to refund the provincial portion of the new blended sales tax if an exemption can't be arranged.

"It is our hope that we can work with the federal government to restore the HST exemption for purchases of poppies and wreaths for the benefit of all members of the Royal Canadian Legion," he said.

Since all poppies are made in Ontario, this is essentially and Canada-Ontario agreement.

According to the Canadian Royal Legion website, about 18 million poppies are distributed each year with the proceeds, after deducting expenses such as the cost of poppies, placed in trust for the support of veterans and their dependants.

Poppies purchased by donation are not subject to any sales tax.

The Royal Canadian Legion's 2010 national poppy campaign was launched Monday, less than three weeks before Remembrance Day on Nov. 11.