Release of British Columbia (BC) Provincial Sales Tax (PST) Legislation
June 28, 2012
On May 14, 2012 the BC government released the new PST legislation that will be implemented on April 1, 2013, and in combination with the 5% GST, will replace the existing 12% BC HST. The legislation is an enhanced version of the old BC Social Service Tax Act (SSTA) with, according to the BC Ministry of Finance (Ministry), all “permanent exemptions” re-instituted and “ common sense improvements that will make administration of the sales tax easier for business” including new online access for businesses to register, update their accounts and make payments; moving the monthly filing deadline from the 23rd to the end of the month; incorporating the previous 8% Hotel Room Tax and 2% additional tax on accommodation in designated areas into the PST; allowing businesses to register using their federal business number; and allowing retailers a broader range of direct customer refunds.
A read through the legislation is at times déjà vu, intermingled with new provisions and a few surprises. The PST fundamentals embodied in the definitions are still there, but with enhancements that presumably tighten the PST noose and allow the Ministry to deal more effectively with problem areas encountered under the SSTA. So the key definitions of sale and tangible personal property (TPP) that underpin the application of tax are largely unchanged, however the former now makes specific reference to the provision of software whereas the latter does not, presumably to deal with the difficulty under the SSTA of deeming software, an intangible, to be something it’s not. Software is newly referenced in many of the sections of the legislation, and also merits its own series of provisions in Part 4 however, in the absence of the Regulations which are yet to be released, it is difficult to know whether any changes to the taxation of software may be in store.
Some new definitions, such as that of an ‘electronic device’ which replaces the term ‘transmitter’ in the definition of telecommunication service and is also referenced in the context of the taxation of software, would appear to be in line with the Ministry’s desire to update the legislation for technological advances. The taxable services definition now encompasses ‘related services’ which are defined to include any service provided in relation to TPP, subject to certain exceptions such as the installation of TPP that will become an improvement to real property. The broad definition of related service is of concern if it signals the application of PST to a more extensive range of services than originally contemplated under the SSTA.
There is also a new definition of carrying on business in BC linked to registration, and a provision similar to that previously in place under the SSTA that allows the Director to determine the fair market value of various supplies of TPP, software and taxable services where he/she disagrees with the price established by the contracting parties. The timing rules for when tax becomes payable are now patterned on the GST/HST timing rules that focus on the earlier of the day consideration is paid and the day it becomes due, subject to additional special rules. Finally, the legislation incorporates a new anti-avoidance rule, and re-introduces the ‘super-registration’ rule whereby persons that are not located in BC, but cause TPP or software to be delivered in BC under specific circumstances, are required to register. The latter does not apply to persons that are located outside Canada, thereby codifying a previous favourable administrative interpretation.
In the absence of the regulations, one cannot fully gauge the extent of the PST changes nevertheless, with the tabling of the PST Act, one can begin the process of understanding some of the areas of change and the impact on individual businesses.