February 15, 2013
If your company sells taxable goods and services in British Columbia, you should be ready for the new B.C. PST that takes effect in just six weeks on April 1, 2013. If you have not yet started your transition process, you’ll need to do so right away.
Your company’s systems and processes have to be ready to collect the right amount of tax on your taxable sales and to collect the right data to allow you to file separate GST/HST and B.C. PST returns, among other things. You will also need to properly use exemptions to reduce unrecoverable PST. Finally, your systems will need to deal with self-assessment of PST on taxable items imported into B.C.
All of your systems should be adjusted with enough time to be tested before going live on April 1, 2013. An undetected error could lead to significant tax assessments.
Your business and the new PST
Have you considered how the new PST will affect your business and its transactions, including the ones that straddle April 1, 2013? Here is a synopsis of some potential effects:
- Your systems — If you are required to register for the new PST, you will have to collect the tax on your taxable sales. Your systems will have to be adjusted to collect the new tax and the appropriate data for you to be able to file separate GST/HST and B.C. PST returns. You will also have to adjust your systems to account for adjustments and special transactions (e.g., promotion items, bad debts and loyalty programs).
- Your sales — If you make PST-exempt sales, you may have to obtain proper documentation to support not collecting PST on the sale.
- Your costs — You may have to pay or self-assess unrecoverable PST on your purchases and imports into B.C., thus increasing your costs.
- Your invoices — You will have to show PST on your invoices and apply PST exemptions where applicable.
- Your compliance issues — You may have to register for the new PST, track PST-exempt sales and train your staff.
You have to determine what your business needs to do to be ready to implement the new B.C. tax effective April 1, 2013, based on your own facts and circumstances.
B.C. will transition from the current 12% harmonized sales tax (HST) back to the 5% goods and services tax (GST) and a new 7% PST, effective April 1, 2013.
B.C. is now one step closer to implementing its new PST with the release on February 13, 2013 of amendments to the Provincial Sales Tax Act to enact the new tax. Further details, including information related to PST exemptions, are expected in regulations that should be announced soon.
New PST — Not necessarily the same as old PST
The new B.C. PST system is very different from the current HST system and may also differ from the old PST that applied in B.C. before July 1, 2010. While some businesses will remember how the old PST worked, these businesses have to keep in mind that the new PST is brand new legislation and may not necessarily have the same application as the old PST.
Businesses generally have to register for the new PST if they sell or lease taxable goods, software or taxable services in B.C.
Businesses located in Canada but outside of B.C. may also have to register and collect the new PST if they make taxable sales in B.C. The new law provides specific registration obligations for businesses located in Canada but outside the province.
The registration process is now underway so businesses that need to register for the new PST should not wait to do so.
For many businesses with sales across Canada, the new PST means adjustments to many of their systems. For example, a business has to adjust its systems for the basic rules of the new tax such as tax rate, collection, refunds and remittances and also for the special rules for adjustments and other transactions such as bad debts, coupons, promotional items and loyalty programs.
It’s important to understand all of these rules to make sure your business charges and collects the right amount of tax on your taxable sales. Your business must also make sure your systems track and collect the right data to allow you to submit different tax returns to different tax authorities. You will also need to pay the right amount of taxes on purchases and claim exemptions where available. For many businesses, some or all of these processes are automated and must be modified accordingly.
In addition, your systems will also have to deal with transactions that straddle the implementation date of April 1, 2013 including returns, exchanges, and coupons.
You should have all of your systems adjusted with enough time to test them before going live on April 1, 2013. An undetected error could lead to significant tax assessments.
Your business will have to review all its sales to determine their tax status under the new PST. You may also have to review and adjust the SKUs of your products. In particular, you should carefully review the tax status of recent additions to your product line.
Businesses should keep in mind their documentation requirements for audit purposes. Some specific PST-exempt sales will have to be supported by certificates of exemption while others may simply need the purchasers’ PST registration number.
Since your business will not be entitled to claim credits for PST paid on its expenses (as it may be entitled to do for HST paid on its expenses), it will be important for you to determine whether some of your purchases can benefits from exemptions.
Some of your purchase costs could also increase due to unrecoverable PST paid by your suppliers. You may want to review your contracts with your suppliers to determine whether the supplier has the ability to pass on such cost increases where the price is otherwise fixed under contract.
Your self-assessment requirements
You may have to self-assess PST for goods or services purchased outside the province that will be imported or used in B.C. For example, you may have to self-assess on legal services purchased outside B.C. or for promotional items sent to B.C.
We can help
Your KPMG adviser can help you manage the impact of the new B.C. PST and other federal or provincial indirect tax changes and deadlines that may affect your business. We can help you manage your indirect tax compliance obligations in all relevant jurisdictions and also help you ensure that you are not missing refund opportunities. For details, contact your KPMG adviser.
|Download KPMG’s new Tax Hub Canada app |
KPMG’s free Tax Hub Canada App for iPads and Blackberrys provides timely, convenient tax news and tax rates to help you respond to changes in tax rules and regulations. Download the app today.
Information is current to February 14, 2013. The information contained in this TaxNewsFlash-Canada is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional advice after a thorough examination of the particular situation. For more information, contact KPMG’s National Tax Centre at 416.777.8500.
KPMG LLP, an Audit, Tax and Advisory firm (kpmg.ca) and a Canadian limited liability partnership established under the laws of Ontario, is the Canadian member firm of KPMG International Cooperative (“KPMG International”). KPMG member firms around the world have 145,000 professionals, in 152 countries.
The independent member firms of the KPMG network are affiliated with KPMG International, a Swiss entity. Each KPMG firm is a legally distinct and separate entity, and describes itself as such.
© 2013 KPMG LLP, a Canadian limited liability partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.
The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.