On October 15, 2012, the BC Provincial government released a Notice, “General Transition Rules for the Re-Implementation of the Provincial Sales Tax,” which provided an overview of the transition rules to re-implement the PST which will come into force on April 1, 2013. The transitional measures were released by way of a bulletin, and draft legislation will not likely be released until January 2013 as it must be tabled and passed by the legislature. The BC government also recently issued PST Bulletin 001, “Registering to Collect Provincial Sales Tax” to provide information on registering for PST.
Similar to the previous Social Service Tax (SST), PST will be a retail sales tax that applies when a taxable good or service is acquired for personal or business use, unless a specific exemption applies. The PST will generally apply to the same tangible personal property (goods) and services that were subject to SST.
PST TAX RATES
- General rate: 7 per cent;
- Liquor: 10 per cent;
- Accommodation: 8 per cent;
- Passenger vehicle rental tax of $1.50 per day;
- 0.4 per cent tax on the purchase price of energy products.
The PST will generally apply to:
- The purchase of new and used goods in BC where the consideration both becomes due and is paid on or after April 1, 2013.
- Leases of new and used goods in BC where the payment both becomes due and is paid on or after April 1, 2013.
- Payments for goods brought, sent or delivered into BC that both become due and are paid for after April 1, 2013.
- Goods imported into BC from outside Canada if the goods are brought, sent, or accounted for under the relevant provision of the Customs Act (Canada) on or after April 1, 2013.
- Purchases of services related to goods located in BC or the installation of goods in BC where the consideration for the service both becomes due and is paid on or after April 1, 2013.
All exemptions under the previous SST are planned to be re-implemented with the PST, including basic groceries and restaurant meals, bicycles, newspapers and magazines; as well as exemptions for business including goods for resale, eligible machinery and equipment. The PST will not apply to most services, including: transportation services, personal services such as haircuts or massages and most professional services such as accounting or engineering services. Services in relation to taxable goods and legal services are examples of taxable services. Further information about PST exemptions will be provided when the PST regulations are released, which the province has announced will be in the fall of 2012.
Certain exemptions are available to all purchasers such as the exemptions for food, water, bicycles and books. Therefore these items may be purchased without the provision of any specific information. However, some exemptions are only available to certain purchasers in certain circumstances. For these exemptions, specific information may be required to substantiate the exemption. The exemption for the purchase of taxable goods, software or taxable services for resale is only available to a person who provides a PST registration number to the vendor; to a vendor who has not yet received a PST registration number who provides an exemption certificate; and to a wholesaler who provides an exemption certificate. In order to substantiate the non-collection of tax, the seller must document the registration number on the sales invoice or similar document or keep a copy of the certificate in their records. Failure to keep the required documentation may result in an assessment, penalty and interest.
Businesses will be able to file PST returns online through the e-services website, at a bank (in person or online) or by mail. However, businesses with total Canadian sales or leases over $1.5 million annually are expected to be required to use electronic filing for returns and payments. Those under the threshold can still choose to file returns by paper. Businesses will be able to sign up for online services at eTaxBC, when the registration process starts.
Online registration for businesses will commence on January 2, 2013, with the PST implementation effective April 1, 2013. The new PST numbers will be 11 characters long in the format: PST–1234 – 5678. In December 2012, letters will be sent out to businesses with information on how to register.
The BC ministry is in the process of winding down its SST audit program. Starting April 1, 2013, you will be able to request that a ministry tax specialist review your books and records to ensure that your systems are set up properly. If an error is found, you will be advised of the corrective actions required but an assessment for the errors noted will not be issued. Should the business fail to correct the errors, an assessment on a subsequent audit with the application of any applicable penalty and interest charges may be issued.