February 14, 2013

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Effective April 1, 2013, BC will eliminate the existing 12% Harmonized Sales Tax (“HST”) and reinstate the 7% Provincial Sales Tax (“PST”) and the 5% Goods and Services Tax (“GST”).

The “New” PST

Other than some administrative improvements, the BC government has committed to bringing back PST fundamentally as it was prior to the implementation of HST. Based on our discussions with the BC Ministry of Finance, transactions that were not subject to PST under the previous PST system should generally not be subject to PST under the new PST system; that is, the new PST system should not be any broader. Whether or not the government keeps its commitment is yet to be seen. As of early February, the PST legislation has not been enacted.

Based on the draft legislation, 7% PST will apply on purchases and leases of taxable goods, with a higher rate of tax applicable on certain sales, including sales of liquor (10%), accommodation (8%), and passenger vehicles priced at more than $57,000 (10%),  just like the previous system. PST exemptions for certain goods and services, including basic groceries, restaurant meals, children’s clothing, gym memberships, and most personal services are also expected to be reintroduced. As before, legal services will be subject to PST.

Transitional Rules

In general, most taxable goods and services will be subject to the 12% HST if they were paid or payable prior to April 1, 2013, and subject to the 5% GST if they were paid and payable subsequent to March 31, 2013.  Also, most goods and certain services paid and payable subsequent to March 31, 2013 will be subject to the 7% PST.

For example, tax will apply under these proposed rules as follows:

  • If the payment is due before April 1, 2013 and is paid before April 1, 2013, HST will apply;
  • If the payment is due before April 1, 2013 and is paid after March 31, 2013, HST will apply;
  • If the payment is due after March 31, 2013 and is paid before April 1, 2013, HST will apply; and
  • If the payment is due after March 31, 2013 and is paid after March 31, 2013, GST and, if applicable, PST will apply.

The above examples also apply to payment plans.  For example, if six equal payments are due each month from January to June 2013, generally, only the payments made before April will be subject to HST. The subsequent payments will generally be subject to GST and, if applicable, PST.

Specific transitional rules exist for sales of housing and other real property and certain other transactions. 

PST Registrants

Most businesses that sell or lease “tangible personal property” (generally, all goods perceptible to the senses) or that provide services related to such property (for example, installation or repair services) will be required to register for, and collect, PST. Businesses that were previously registered under the old PST system will be required to re-register under the new rules.

Businesses will also be required to register if they provide:

  • lodging in a hotel, motel, resort or bed and breakfast with four rooms or more, or similar business establishments, for periods less than one month;
  • legal services;
  • telecommunication services; or
  • software.

Wholesalers, businesses that provide only non-taxable or exempt goods or services and independent sales contractors (who purchase products from a direct seller for resale) may not need to register.

A person or business that is a “small seller” is also not required to register for PST. To qualify as a small seller, gross revenue from the sale of eligible goods, software, or taxable services must be $10,000 or less in the previous 12 months.  In addition, the seller cannot maintain an established business nor commercial premises, among other limitations. 

Registration, tax return filing and payment will be available online using the new service eTaxBC. This service is already open to allow for early registration. Along with new registrants, individuals and businesses that were registered under the previous system of PST will need to re-register under the new system using a new PST registration number.  Informational letters are currently being sent out by the government to provide instructions and resources to assist with registration.

For more information on the return to PST and how it impacts you or your business, contact us. We will be providing further details on the transition back to PST as they are released.

 

 

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