On April 1, 2013, nearly every provision of the Provincial Sales Tax Act (“PSTA”) shall come into force, and the existing Harmonized Sales Tax’s brief interlude in British Columbia, shall come to an end. In a political sense, the government has suggested that the new PST will be similar to the old PST (as it existed prior to the introduction of the HST). While there are certain similarities, the new PST, it’s certainly not the old PST.
The most obvious change, in relation to the existing HST, will be a move from a single 12% value added tax to a separate 5% GST and a 7% PST. In addition, the tax base will be broadened under the PSTA, with the tax base being made up of tax on personal property, and a tax on services. Taxable personal property shall be made up of both “Tangible Personal Property” and “Software” or intangible personal property. The taxation of services will be based on the taxation of most services provided by a registrant, which are considered “taxable services” under the PSTA.
In short, the acquisition or consumption of tangible personal property (both new and used, but excluding real estate), or the provision of services, and the transfer of gifts of goods, taking place within or into the Province, will attract the new PST.
It is important to note that the PSTA provides for very few exemptions, although it must be pointed out that the regulations to the PSTA will further define the scope of those exemptions. As for the date of this article, the detailed regulations relating to exemptions, have not been made available.
Purchasers, lessees, users and others including recipients of gifts, etc. will be subject to the payment of PST on those goods and services. PST, to the extent that timing is an issue, will be paid on the earlier of the payment of consideration for the goods or services, or when the consideration is payable (e.g. where payment is required prior to delivery of the goods or service).
Registrants under the PSTA are responsible for collecting PST, and are defined as “collectors”, in the PSTA. Collectors are in fact agents of the Provincial government, and the funds that they collect shall be considered to be held in trust by them, for the Provincial government.
It is important to bear in mind the following additional characteristics of the new provincial sales tax:
- The specific software taxation provisions are much broader than in the prior legislation and will apply to software used solely within British Columbia, or only partially within British Columbia;
- There is a new tax rate applicable to the purchase of the vehicle, boats or aircraft, at a private sale, of 12%;
- There is a definition of a “BC resident” in section 1 of the PSTA that is not included in the former social services tax act, and is a fairly broad definition;
- The PSTA provides for specific GAAR or general anti-avoidance rules, at section 201 of the PSTA, that may dramatically impact tax planning in relation to the new PST;
- All existing HST registrants and all other individuals and businesses that are required to register under the PSTA, will have to obtain a new registration number. Businesses wishing to register will be able to do so online, commencing January 1, 2013;
- There are a series of new rules in that PSTA, in relation to “small sellers”, which generally mean sellers of goods or services, where the seller earns $10,000 or less in annual sales of taxable goods, software and services;
- PST rates varying from 8% to 10% for motor vehicles, where the purchase/lease value is $55,000 or more;
- The new PST legislation is considered an invoice driven tax; and
- All Government tax bulletins relating to the old PST, have no application with regard to the new PST;
- All commercial digital products, where consideration is paid on acquiring same, are taxable transactions.
We shall be publishing further articles on the PSTA, as the law and regulations develop.