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When it comes to determining whether your product offer is subject to B.C. PST, the first step is to determine what exactly you are offering. Is it a service, software or tangible personal property (TPP)?
You would think it should be intuitive to point to a product offer and say, this is a service, this is TPP or this is software. But here is the ‘magic’ of B.C. PST—it is not always intuitive and you may be surprised by the result.
Let’s consider an example of a service that is considered to be software by the Province. Your business offers payroll services. Companies with employees sign up for your service, you make the calculations for various deductions and make the direct deposits. On the surface, it may look like you are offering a service that would not be subject to B.C. PST.
But upon a closer look, your customers (i.e. the employers) are able to enter payroll information such as creating a new employee file using the cloud-based software you provide and are able to use the software to create reports for their human resource management. Now the Province considers the payroll ‘service’ you provide no longer purely a service; it will have crossed the line into being a provision of software. Because software is subject to B.C. PST, you are required to charge your customer PST for the use of the software. It’s not quite the magical illusions found in Las Vegas, but this example is pretty darn close!
Here is an example where a service is considered TPP by the province. You provide web hosting services to customers. Your offers range from basic website hosting on a shared server with limited storage space, to complex managed hosting with specified type of server, server size and number of cores. On the basic end of the spectrum, the Province considers you to be providing a service of web hosting, which is not subject to PST. On the complex end, the Province treats your managed hosting service to be a PST taxable supply of TPP because your customers are using your specified type of equipment, even if the equipment is not dedicated to a particular customer.
The same offerings in B.C. that are provided in the other PST provinces can come to a completely different answer. More magic? More illusion? Maybe just more confusion.
The line between a service and software or the line between a service and TPP is vague at best. Even if you believe what you are offering is a service, it is still a useful conversation to have with your indirect tax service provider to make sure you are not stepping over that magical PST taxable line.
To learn more, contact Angela Chang, CPA, CGA, at 778.374.2121 or [email protected], or your local MNP Tax Advisor.
Related Topics:Indirect Tax
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