A business owner in Steinbach, Man., is defying the provincial government's orders to charge a higher provincial sales tax, arguing that the tax hike isn't even law yet.

Baby supplies PST-free

While the PST increase means many things in Manitoba cost a bit more, it now costs a little less to buy things for a baby or toddler.

Under tax changes that also came into effect Monday, the provincial sales tax no longer applies to supplies for babies and children under the age of two.

Items that are now PST-exempt include diapers, strollers and cribs.

Manitoba's NDP government raised the PST from seven to eight per cent on Monday, even though Bill 20, which would allow the province to increase the tax without having to hold a referendum, has not yet passed into law.

Many business owners in the province have said they'll comply with the tax hike, but not Denise Kehler, whose Steinbach-based company produces sheet metal.

The business has posted a sign on its window, saying it is not collecting or remitting the increased PST.

"We're prepared to take that as a loss ourselves, rather than do what we feel is the wrong thing and charge a tax before its law," Kehler told CBC News on Tuesday.

"As soon as it's law we won't break any laws, and we don't believe we're breaking any laws at this time."

Kehler said she will set aside $1,700 for the month of July, in case the government forces her to pay the extra tax later.

Public hearings still underway

The province has said it's raising the PST to help fund more infrastructure projects, including roads and flood-prevention structures.

A legislative committee is still holding public hearings this week into Bill 20. The first hearing last week attracted dozens of people, most of whom opposed the tax hike.

"We've done our homework. We know we're using the same process that's been used year after year," Finance Minister Stan Struthers told reporters on Tuesday.

The opposition Progressive Conservatives announced on Tuesday that they have hired a lawyer to fight Bill 20 and the PST increase.

"We will, if necessary, pursue legal avenues in order to take this to the next level," said Tory Leader Brian Pallister.

The bill cannot be taken to court until it is passed into law in the legislature.

Kehler said she's not refusing to collect the extra PST to be an activist, but she's making the move because she believes tax increases should be implemented in a democratic fashion.

"That's why I'm so disheartened by this whole thing because it just seems anti-democratic. It seems anti-Canadian," she said.

"I didn't think they could do it and now that I found out they can, or they're trying to, it feels really unfair."