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Transitioning Back to PST in B.C.: What You Need to Know

26/10/2012


On April 1, 2013 B.C. will be making history. B.C. will move from having a 12% HST to a 5% GST and a 7% PST. BC had a Provincial Sales Tax before July 1, 2010, however this new PST will be different.

A new Provincial Sales Tax Act was passed on May 31, 2012. On October 15, 2012 the province released transition rules to provide some guidance on the re-implementation of the PST. The transition rules are subject to the approval of legislation.

MNP is here to help your business with the transition back to PST. The information below highlights what a business needs to be thinking about and doing now in order to be ready for the transition date of April 1, 2013.

What do you need to do now? Businesses first need to evaluate whether they will be required to charge PST.

PST will generally apply to sales or leases of tangible personal property (things you can touch and feel goods) PST will apply to the sales, leases of these goods when the invoice is issued after April 1, 2013. PST will also apply to software, services to goods, accommodation, legal services, gifts of boats, vehicles & airplanes and telecommunication services. If your business is involved in software, software support, telecommunications, leasing and or real property there are specific rules that should be reviewed in detail.

All taxable goods and services acquired outside of B.C. and bought into the province after April 1, 2013 will be subject to PST.

The exemptions that we had under the previous PST will be re-implemented including, restaurant meals, bicycles, newspapers & magazines, dry cleaning and most services.

PST RATES
  • 7% for most taxable goods and services.
  • 10% for liquor.
  • 8% for accommodation
  • 7-12% for vehicles depending on the value.
  • The levies that we previously had will also be re-introduced, such as the passenger vehicle rental tax of $1.50 / day.

Once you have determined whether PST will be applicable to your business you will need to obtain a new PST registration number. This can be done online after January 2, 2013.

The link to do this can be found at PSTinBC.ca

In an effort to make this easier, the website allows you to use your Federal Business number to bring up your business information.

Review of Systems and Internal Controls

Businesses will need to ensure that their internal systems are in place to correctly charge and apply the tax when necessary. This may require a review of internal processes and training for staff so that the key persons in the business are aware of when the tax is applicable. If you are selling your computers to a customer in Alberta and they send their delivery truck to your Kamloops warehouse to pick up the goods are you required to charge GST and PST, or GST? As your customer is picking up the goods in B.C. they will be required to pay PST and GST. There ere are special rules depending on where your goods are supplied.

What would the tax treatment be in the following situation?

Your business sells 10 computers, the deal is entered into on March 25th, and the customer does not come to pick up the computers and does not receive an invoice until April 15th. Would the invoice have HST at 12%, GST at 5% and PST at 7%?

In this case the invoice would have GST of 5% and PST of 7%.

The general rule for when PST becomes payable, the earliest of when:

  • The seller issues an invoice
  • The date of the invoice
  • The day the seller would have issued an invoice without delay
  • The day the purchaser is required to pay the considerations pursuant to a written agreement.

For example:

Mrs McIntosh is leasing her car from the local Ford dealership. The lease began October 1, 2012 and will run for three years. PST will be applicable to the lease payments made after April 1, 2013.

Contracts that are on the go such as long term leases will need to be reviewed to ensure that the taxes are adjusted. This is important for businesses to ensure they collect the right amount of tax, but is also a consideration for businesses that are purchasing supplies and goods. The PST is not a deductible cost to a business, whereas the HST paid by most businesses is generally recoverable.

Businesses that are involved in real property contracts will need to review their contracts to see if their quotes need to be adjusted. Costs will change after April 1, 2013. As part of the transition rules that were released on October 15, 2012, information was provided that addresses the following:

• When goods are brought into B.C. after April 1, 2013 used for improving real property, they will be subject to PST.
• Where a contractor acquires goods after April 1, 2013 for use in a real property project, PST will be payable. Also if the contractor uses goods after April 1, 2013 and PST is not otherwise payable then they will be required to self assess PST when the goods are incorporated into a project. The contractor will not be required to self assess PST if they can show that they have paid the provincial portion of the HST and will not be able to claim any input tax credits.

The example provided in the transition rules is of a roofing contractor that acquires shingles on March 25, 2013. They are installed on a building after April 1, 2013. PST will be payable by the contractor.

The above is meant to provide your business with some information to get you started on the Road Back to PST. This is just a brief overview of the rules and information that should be considered.

Please contact an Indirect Tax Advisor for further information and discussion regarding your particular business.