Introduction

The British Columbia ("BC") Government has released a bulletin setting out the general transitional rules for the re-implementation of the Provincial Sales Tax ("PST"). The PST will be applicable to transactions occurring on and after April 1, 2013. Transitional rules determine how the PST will apply to transactions that begin before that date and end after it.

This article provides a brief overview of the proposed general transitional rules that apply to goods, i.e., tangible personal property.

Basic Rule

The basic transitional rule for the purchase of goods is relatively simple. If the consideration for the goods is paid or payable before April 1, 2013, the PST does not apply to the transaction. If the consideration for the goods is payable on or after April 1, 2013, the PST will apply to the transaction as long as the goods have not already been paid for on or before March 31, 2012.

PST is payable when the consideration for the supply of goods is paid or becomes due. Generally, the consideration is due on the earliest of the following:

  • the day the seller first issues an invoice in respect of the sale;
  • the date of the invoice;
  • the day the seller would have, but for an undue delay, issued the invoice; and
  • the day the buyer is required to pay the consideration under a written agreement.

There is a special rule for goods and services supplied by way of lease, licence or a similar arrangement under a written agreement. In such circumstances, the consideration becomes due on the day the written agreement requires the purchaser to pay the consideration.

Examples

A person buys a couch on March 31, 2013 and pays for it at the time of purchase. No PST is payable because the consideration is paid before April 1, 2013.

A person agrees to purchase a television on March 31, 2013, and the consideration is due the next day when an invoice for the sale is issued. PST is payable because the consideration became due on April 1, 2013.

A business orders office supplies and is invoiced on March 31, 2013. The business pays the invoice on April 1, 2013. No PST is payable because the consideration became due before April 1, 2013.

Purchaser Takes Possession or Ownership Before Consideration Paid or Due

Determining whether the PST applies can be more complex when the purchaser takes possession or ownership of goods before the consideration is paid or due. There is a special rule proposed in cases where all or any portion of the consideration for a purchase of goods has not been paid or become due on or before the last day of the month immediately following the first month in which:

  • in relation to a purchase of goods by way of sale, the ownership or possession of the goods is transferred to the purchaser; or
  • in relation to a purchase of goods by way of sale under which the seller delivers the goods to the purchaser on approval, consignment, sale-or-return basis or other similar terms, the purchaser acquires ownership of the goods or makes the goods available to any person, other than the seller.

When the above circumstances apply, the PST would be payable on the last day of the month immediately following the month in which ownership or possession is transferred to the purchaser or the purchaser makes the goods available to a third party ("Relevant Day").

The transitional rule that applies in these circumstances is as follows. If the Relevant Day falls before April 1, 2013, the PST does not apply to the transaction. If the Relevant Day falls on or after April 1, 2013, the PST is payable on all or any portion of the consideration that has not been paid or become due on or before March 31, 2013.

Examples

A company has a "buy-now-pay-later" promotion. Under the promotion, a person buys a computer in March 2013. The person gets immediate possession of the computer but does not have to pay for it until March 2014. PST applies because all of the consideration for the computer will become due more than one month after the person takes possession of it, and the last day of the month following the month in which the person took possession of the computer is after April 1, 2013.

Under the same "buy-now-pay-later" promotion, a person buys a computer in February 2013. The person gets immediate possession of the computer but does not have to pay for it until February 2014. No PST applies because all of the consideration for the computer will become due more than one month after the person takes possession of it, and the last day of the month following the month in which the person took possession of the computer is before April 1, 2013.

Goods Brought Into BC

Generally, PST will apply to goods brought, sent, or delivered into BC if:

  • a BC resident brings, receives or sends the goods into BC for the BC resident's own use or the use of another person at the BC resident's expense;
  • a person brings, receives or sends goods into BC for a BC resident's use or the use of another person at a BC resident's expense;
  • a person brings, receives or sends goods into BC for use by the person's business;
  • a person brings, receives or sends into BC a vehicle for the person's own use or the use of another person at the first person's expense, and the vehicle is registered in BC; or
  • a non-resident who owns real property in BC brings, receives or sends goods into BC to be used primarily in BC in the year following the goods entry for the non-resident's own use or the use of another person at the non-resident's expense (a non-resident who leases real property in BC may also satisfy this condition in certain circumstances).

If one of the persons described above receives goods in BC and the goods are delivered into BC by a seller from within Canada, the basic rule is that PST will apply to payments that become due on or after April 1, 2013 and are not paid before that date. If the goods are brought or delivered into BC from outside of Canada, the basic rule is that PST will apply if the goods are brought or delivered into BC or accounted for under the Customs Act on or after April 1, 2013.

Examples

A BC resident company purchases office furniture in Alberta in March 2013. The seller delivers the furniture to BC on March 31, 2013 and issues an invoice the next day on April 1, 2013. PST is payable because the consideration became due on April 1, 2013.

A BC resident drives to Bellingham, Washington and purchases a refrigerator on March 31, 2013. The BC resident pays for the refrigerator on the same day. The refrigerator is shipped to BC the next day. PST is payable because the refrigerator entered into BC on April 1, 2013.

Leases of Goods

Generally, PST applies on any consideration paid for the lease of goods if the consideration is paid or becomes due before April 1, 2013, and PST will not apply if the consideration is paid or becomes due before that date.

Leased goods brought or sent into BC by a BC resident or for business purposes will be subject to PST if the leased goods are brought or sent into BC on or after April 1, 2013. If all the consideration for the lease has been paid before the importation, the amount of PST payable will be based on the amount of the consideration attributable to the use of the leased goods in BC on and after April 1, 2013. If all the consideration for the lease has not been fully paid (e.g., where payments are due monthly), PST will be payable on the consideration that becomes due on or after April 1, 2013 and is not paid before that date.

Examples

In January 2013, a person leases a car in BC under a 36 month lease. PST will not apply to lease payments made on or before March 31, 2013. PST will apply to lease payments made on or after April 1, 2013.

In January 2013, a company leases equipment in Alberta and uses the equipment at its Alberta operations. The lease is fully paid in January 2013. On April 1, 2013, the company brings the equipment into BC for use at its BC operations. PST applies to the portion of the lease price attributed to the use of the equipment in BC on and after April 1, 2013.

Exemptions

As set out earlier in this Bulletin, there will be numerous exemptions to the PST. The exemptions will be contained in regulations which are expected to be released in draft form in late December 2012.

Conclusion

The BC Government's bulletin on general transitional rules also contains rules for transactions involving goods used in improvements of real property, software, services related to goods, accommodation, legal services, and telecommunication services. The BC Government has also released a bulletin on specific transitional rules for real property including housing.