A recent amendment to British Columbia’s Provincial Sales Tax Act extends the requirement to register for, and collect, the 7% provincial sales tax (“PST”) to any business located outside BC that holds inventory in BC for sale to a person in BC.
The new section 172.1, which will start to apply on September 1, 2015, generally requires PST registration and collection by a person that:
- accepts purchase orders originating in BC;
- sells goods to a customer in BC for the customer’s use (not resale); and
- holds the goods in inventory in BC at the time of sale.
Any person caught by this rule who fails to register once the amendment is in force may be subject to a penalty equal to the PST not collected, plus an additional 25% penalty along with other penalties and interest.
We understand the change was designed primarily for non-resident sellers that hold inventory in third-party warehouses in BC for sale to BC consumers. We note, however, that the change applies to more than just consumer sales; for example, sellers of industrial goods, including those whose goods are being held in BC on consignment, may also be required to register and either collect PST or obtain the appropriate exemption certificates from their customers. Section 172.1 does not apply to a person that sells only tax exempt goods, such as food.