May 15, 2012
Yesterday the British Columbia government introduced legislation (the Provincial Sales Tax Act – PST Act) to implement the new PST effective April 1, 2013. In a related news release, the B.C. Ministry of Finance reiterated the government’s intent to:
- Re-implement all permanent PST exemptions
- Make PST administration easier for businesses
- Apply the new PST to the same taxable goods and services purchased by consumers that the previous PST applied to before July 1, 2010
- Make the legislation clearer and easier to administer.
Still to come are the Regulations to the PST Act, which will provide much of the detail, particularly on exemptions and administrative matters, as well as any transitional provisions and consequential amendments to other legislation.
This TaxNewsFlash-Canada summarizes some of the key points in the proposed PST Act and the news release.
Background — B.C. voters reject HST
British Columbians voted in a tax referendum in 2011 to return to the goods and services tax (GST) and the provincial sales tax (PST), thus rejecting the harmonized sales tax (HST).
B.C. Finance announced in August 2011 that the PST will be reinstated at 7%. During the transition period, the provincial portion of the HST will remain in place at 7% along with the federal portion at 5%. For details, see KPMG’s TaxNewsFlash-Canada 2011-25, "B.C. Voters Reject HST — Transition Back to PST Begins".
As previously announced, the PST rates will include:
- 7% for taxable goods and services
- 10% for liquor
- 12% for private sales of vehicles, boats or aircraft
- Rates varying from 8% to 10% for motor vehicles where the purchase/lease value is $55,000 or more.
As expected, vendors will have to register before selling taxable goods or services in B.C. The definition of vendor includes a business that sells taxable goods or services in B.C. in the ordinary course of the business carried on in B.C.
The proposed PST Act provides that certain businesses will be deemed to be carrying on business in B.C., including those with a B.C. telephone number or address listed in a B.C. directory, or where the business name appears in any advertisement that provides an address or telephone number in B.C. for the business. Businesses with employees or representatives in B.C. or with a warehouse, office or other place of business will also be deemed to be carrying on business in B.C.
Businesses located in Canada but outside B.C. will be required to register when selling taxable goods or software into B.C., when certain conditions are met.
In the news release, the B.C. government indicated that businesses would be able to register using their federal business number.
A qualifying small seller is generally not required to register and collect PST on its taxable sales. The threshold, subject to certain rules, is set at $10,000 or less in annual sales of taxable goods, software and services. Some small sellers will find themselves having to collect PST but not GST since the thresholds for those two taxes are different (the GST threshold is $30,000 in taxable supplies per year).
While many details will be provided in the PST Regulations, the government noted in its news release that the due date for tax remittances and returns will be moved to the last day of the month to match GST/HST remittances.
The proposed PST Act provides that certain items (subject to certain conditions) may be exempt from the tax, including:
- A taxable component sold with a non-taxable component for single price
- Food for human consumption other than prescribed food products and water and ice
- Fuel taxed or exempt under the Motor Fuel Tax Act
- In relation to industry and commerce: various exemptions including raw materials, prototypes, packaging materials and production machinery
- Purchases or leases of goods intended for lease
- Certain supplies of software
- Legal aid services
- Motion picture or audio production recordings in prescribed circumstances
- Goods sold for less than 15 cents.
Much of the detail relating to these exemptions will be provided in the PST Regulations. Many exemptions that existed in the old PST legislation are not referenced at all in the proposed PST Act but these exemptions are expected to be included in the PST Regulations. The government has indicated it expects the PST Regulations to be released this fall.
The proposed PST Act includes more precise rules than the old PST legislation for determining when PST will be payable in respect of a particular transaction. The proposed new rules are substantially the same as those applicable for GST/HST purposes. Generally, PST will be payable on the earlier of the date the consideration for a taxable transaction is paid and the date such consideration is due. Generally, consideration will become due on the earliest of the date payable per agreement, the invoice date, the date the invoice is issued or the date an invoice would have been issued but for undue delay.
Although the proposed PST Act is similar in nature and scope to the old PST legislation that applied prior to the introduction of the HST on July 1, 2010, the proposed PST Act is a completely new piece of legislation. Undoubtedly, the application of the new PST will vary in certain respects from the old tax businesses were familiar with prior to the HST.
Your KPMG adviser can keep you up-to-date on developments and help you assess possible opportunities that may be available to your business during this transitional period. For details, contact your KPMG adviser.
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Information is current to May 15, 2012. 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.
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