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British Columbia Transitional Provincial Sales Tax Issues
Posted December 18, 2012
A Potpourri of BC PST Transitional Issues
As we await the final piece of the BC PST puzzle in the form of the BC PST (“PST”) Regulations and transitional legislation, the BC Ministry (“Ministry”) continues to release information useful to taxpayers that are preparing to transition from the BC HST to the PST. Information regarding the PST transitional rules was released in PST Notice 2012-010, with the general rules focussed on PST applying at the earlier of when consideration for a taxable good, software, or service becomes due, or is paid without having become due. The rules for determining when an amount becomes due, as well as many of the exceptions to the general rule, are largely modelled on the GST/HST, with special rules reserved for certain scenarios such as goods used by a contractor in supplying and affixing, or installing, affixed machinery or improvements to real property. With regard to such goods, except where an exemption applies, if PST is not otherwise payable by a contractor under the general transitional rules, PST will be payable if the goods that are purchased, brought or sent into BC for use cease to be personal property at common law after March 31, 2013 – therefore the timing of when the goods are used to improve real property overrides the general transitional rule.
Registration issues are covered in newly released Bulletin PST 001, which identifies January 2, 2013 as the start date for the registration process. Under the BC PST Act (“Act”), which received Royal Assent on May 31, 2012, a vendor who sells taxable tangible personal property (“TPP”), software or a service in BC at a retail sale, will be required to register. A vendor is defined to include a person, other than a small seller (a defined term, one of the requirements of which is ≤ $10,000 in gross retail sales in the prior year) who in the ordinary course of business in BC sells or provides TPP to a purchaser at a retail sale in BC, or offers to do so. Lessors of taxable TPP, and certain real property contractors and direct sellers, will also be required to register under the Act, as will persons that are located in Canada but outside BC, and solicit orders in BC for the sale of taxable TPP or software by advertising or other means, and cause the TPP or software to be delivered in BC.
Where registration is required, the taxpayer must apply anew, as the old BC Social Service Tax registration number does not continue into the new system. As part of the administrative improvements promised by the government, certain E-services will be available, including online registration provided the applicant has a BN number, and online remittance of amounts owing. Similarly to existing GST/HST filing requirements, electronic filing of BC PST returns and payments will be mandatory for businesses that have total Canadian sales or leases in excess of $1.5 million annually. Filing frequency - monthly, quarterly, semi-annual or annual - will be determined based on the estimated PST to be collected on sales and leases in BC, and can be adjusted by the Ministry based on actual collections.
BC Finance Bulletin “Common Questions about Returning to PST” covers options for obtaining rulings from, and one-on-one consultations with, Ministry tax specialists on the PST. It also outlines the option of a ‘books and records’ review that the Ministry is offering taxpayers, starting on April 1, 2013. According to the Ministry, the review is not an audit but rather, a general overview of the taxpayer’s accounting process to ensure that the taxpayer’s systems have been set up to properly collect, report, remit, and pay the tax. If under-collection or remittance is found, an immediate assessment will not be raised, however, the Bulletin states that “the business will have the opportunity to correct the mistakes on their next return” failing which, “the errors will be subject to an assessment on a subsequent audit with the application of any applicable penalty and interest”. Taxpayers should therefore understand that the books and records review offers a way to ensure compliance in the transition period, but is not an option to avoid an assessment where errors are found on audit. BC has indicated that audits under the PST will generally begin April 2014 to allow taxpayers time to comply.
Audrey Diamant
PricewaterhouseCoopers LLP
Tel: 416-687-8933
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