B.C. homebuilders say they're already seeing evidence that the new harmonized sales tax is driving the renovation business underground.

Before the implementation of the HST, the BC Homebuilders Association estimated that more than a third of all home renovations were done by contractors working under the table. Now that the HST has come into effect, they believe that number has spiked dramatically.

Jeff Bain, of JKB construction, believes these "cash" contractors will have a huge impact on his bottom line.

"I guess over the summer we've probably slowed down at least 30 per cent. There's a lot less calls coming in, and I have to attribute that to the HST. People are trying to figure out whether they can afford to do it and what the renovation is ultimately going to cost them at the end of the day," Bain told CTV News.

"When you're pricing something at $300,000 to $400,000, that's a lot of extra taxes that they're looking at."

But Finance Minister Colin Hansen insists that small businesses have the upper hand.

"The value-added tax systems in many cases help mitigate the underground economy. If you have a contractor who has to pay HST on all the materials they buy -- like tires, cell phones -- if they're working in a cash economy, then they don't get to claim those input credits. Small businesses actually get rebated on their taxes, but they only get rebated if they charge the HST to their customers."

Renovating your home using under-the-table labour can save money on your bottom line, but Bain explains that it is a risky proposition.

"It's a dangerous way to go, because you're hiring people that are inexperienced. They haven't got proper credentials, they're not running a proper professional company, they're not paying income tax, and they're not paying WCB (Workers' Compensation Board) insurance. So if someone gets hurt on your site, you're liable."

Some companies, like West Coast Windows, have chosen to pay the HST themselves to keep their business going strong, but that summer promotion ends next week.

With a report from CTV British Columbia's Bal Brach