The Government of Saskatchewan has changed PST rules to attempt to collect sales tax from large online services like Amazon and Airbnb that connect buyers and sellers.

The amendments in Bill No. 211 became law on July 3, 2020, but actually state that they have retroactive effect to January 1, 2020. The changes add a number of new definitions and concepts to the legislation.

The Provincial Sales Tax Act, RSS 1978, c P-34.1 (the “Act”), already requires “vendors” to collect sales tax from consumers in retail sales or when delivering “taxable services.” Now, the Act expands the concept of a “vendor” to include:

  • “marketplace facilitators” for marketplaces where retail sales are made or taxable services are delivered, even if they do not carry on business in Saskatchewan; and
  • operators of “online accommodation platforms”, if the platform brings together providers of “accommodation services” in Saskatchewan and their users.

What is a marketplace facilitator?

A “marketplace facilitator” is defined as someone that makes or facilitates a marketplace for retail sales by marketplace sellers, and directly or indirectly collects payment from consumers to remit to those sellers. The facilitator does not need to be compensated for doing so to meet the definition and be subject to tax, because “taxable services” now includes the service of allowing consumers to purchase tangible personal property, services, in electronic form through a website, internet portal, gateway, application, or other means. Doing so is now referred to as delivering an “electronic distribution service” and operating an “electronic distribution platform.”

What is an online accommodation platform?

An “online accommodation platform” means an electronic marketplace that enables or facilitates transactions in relation to “accommodation services” located in Saskatchewan. While not specifically defined, “accommodation services” are now named as taxable services, even when delivered or accessed through an “online accommodation platform” along with incidentals like transaction, processing or administrative services.

Further details about the amendments

During the second reading of Bill No. 211 on June 18, 2020, Saskatchewan’s Minister of Finance stated that the amendments “will help to maintain a fair and level playing field for resident and non-resident businesses operating in Saskatchewan”, because “…some of the large online platforms that are able to sell products on the internet…don’t have to pay taxes or charge taxes and remit taxes on behalf of the purchasers for the people of Saskatchewan.” The Minister went on to name several of the targeted platforms:

[L]arge companies like Amazon who are currently enjoying a tax-free holiday perhaps is one way of putting it. I’ve seen other people describe Amazon and Airbnb and some of those larger platforms as the robber barons of the 21st century, Mr. Speaker, because they entered in a space where there weren’t tax regimes in place.

The Minister’s characterization is interesting, considering that the Act was not broad enough to impose tax on these transactions until these amendments significantly expanded its scope. Further, her reference to a “tax-free holiday” must be referring to a time before January 1, 2020, since the amendments are intended to apply retroactively to all transactions on or after that date.

Looking ahead

There are many questions remaining about the specific details of how the new rules apply. The Act’s already broad concepts have been expanded further to attempt to impose obligations on transactions going forward, in addition to many that have already taken place. It is also possible that the constitutionality of the legislation will be challenged, because it seeks to impose obligations on entities with no “brick-and-mortar” presence in the province and onto events that have already occurred. There have been several previous cases involving retroactive tax legislation in Canada, and Saskatchewan’s new rules may give rise to another.