It is hard to imagine that 10 years ago, the ARA worked with the provincial government to bring information pertaining to the application of the Provincial Sales Tax (PST) to industry. We are thankful that the B.C. government’s taxation department has again provided details around industry specific questions on the application of the PST. Access to the PST webinar and the slide deck used by the taxation department can be found on our site www.ara.bc.ca. We would like to thank Darren Knox, research and policy analyst, Outreach, Province of B.C.; Steven Dealmeida, policy analyst at Ministry of Finance, Province of B.C.; and Zulifiqar Ali, policy analyst at Ministry of Finance, Province of B.C., for presenting and providing expertise in relation to the questions raised by members.
It is clear that depending on the specifics of the issue presented and the business application, answers to specific PST questions are difficult to assess. One of the webinar’s main takeaways is to encourage industry members to send their specific issues/questions to the government’s “ruling” team, who can then provide a written response (as in the example cited) to determine the accuracy of PST application.
Below, I try to summarize some discussion points; however, as taxation is not a black and white process, the answers could vary based on your exact situation and the scenario presented. It is highly recommended that industry members subscribe to updates on specific PST updates related to your sector.
The PST is a retail sales tax that applies when you purchase or lease taxable goods or services. When examining how the PST applies to goods and vehicles, most industry questions can be answered by considering how it applies when:
- You purchase or lease a vehicle in B.C.
- You bring a goods/vehicles into B.C. for use in B.C.
- You send or receive delivery of goods/vehicles in B.C. for use in the province, unless an exemption applies.
In the case of vehicles, you must pay PST regardless of whether the vehicle is for personal or business use, even if you are a PST collector. The PST also applies to the purchase or lease of both new and used goods, and it is paid on the total amount paid to receive the goods, including deliver charges.
Self-Assessing
If your supplier does not charge you PST on taxable items, you must self-assess the PST due with your next PST return. If you take taxable goods from your resale or lease inventory for business or personal use, you must self-assess PST. (i.e. if you purchased a box of wipers blades for resale but you use them in the course of your repairs, you must self-assess the PST due based on the cost of the goods). For goods brought into B.C., you must pay PST if you were not charged at the time of sale/lease, and then you must self-assess the PST due.
Shop Supplies
Goods used in the repair of vehicles and that remain attached (e.g. parts and paint) are exempt from PST for the service provider. Goods not remaining attached such as shop supplies (tape, paper towels, gloves, etc…) are subject to PST for the service provider, as the service provider consumes them during the repair of the vehicle. When you invoice your customer, you will charge for shop supplies, which are part of the purchase price of the repair services and subject to PST to the customer. Exemptions include vehicle scans, cleaning services, and waxing/polishing, provided no taxable service is completed in conjunction with that service. Here are some examples:
- If you complete a vehicle scan, wash, or wax the vehicle, the service is exempt but the service provider must pay or self-assess PST on all goods, including shops supplies, used in providing this exempt service.
- If you complete a vehicle scan, wash, or wax in conjunction with the vehicle repair, then PST is chargeable to the customer.
Bundled Sale
If you sell taxable and non-taxable goods, services, or property together for a single price, you are making a bundled sale. Generally, you charge PST on the fair market value of the taxable portion of the sale. There are a number of exemptions (and examples) that can apply, and those impacted should explore the PST Bulletin 316 to explore this more.
Vehicle Appraisals
When determining the value of an impounded vehicle (effective Oct 1, 2022) transferred to an Impound Lot Operator (ILO) who is acquiring the vehicle for resale purposes, note that there is a PST exemption. However, if the ILO is retaining the vehicle, an appraisal is required, so complete a motor vehicle appraisal form (notice 2022-005). If impounded, the vehicle cannot be moved or released unless an order of release is received.
Vehicle Purchase Tax Rates
PST rates vary based on the value of the vehicle purchased and the location where it is purchased. Examples include vehicles purchased from a private sale or as a taxable gift (versus purchased from a GST registrant), a gift from a GST registrant, or a vehicle imported into Canada or leased. There are also differing rates for internal combustion engines (ICE) and zero emission electric vehicles (ZEVs). PST rates vary on ZEV vehicle purchases in the same way as ICE vehicles, but at different rates. ZEVs include battery plug-in hybrids. There is an exemption list of eligible ZEVs under development. An important consideration is that when the PST rate is 15% or higher, the PST amount is included in consideration for the purposes of calculating GST, but in all other cases it is not.
Used Zero-Emission Vehicles (ZEVs)
Effective February 23, 2022, used ZEVs are exempt from PST. This exemption applies to a purchase or lease with at least 6,000 km. There is no specific time period, only the kilometer measure. This exemption is in effect until February 22, 2027. In the case of a lease buy-out, this exemption is only eligible if the ZEV was previously purchased at a retail sale by someone other than the lessor, or leased by someone other the original lessee. Check the EVfriendly website for more information.
Courtesy Cars
Each month a motor vehicle is used as a business vehicle the PST is calculated using the following formula: PST payable = 1.75% x (Avg. vehicle value x # of vehicles x application percentage). PST Bulletin 117 contains the detail. Many of the questions identified during the PST webinar require rulings to provide a specific written response to the specific business operation concern. Vehicles purchased for the sole intent of leasing are PST-exempt.
Audit
An audit is a formal examination to ensure that you are paying and charging the tax that is due, and to identify areas where you may be doing this incorrectly. The auditor will advise you if you are entitled to any refund found during the audit. Audits are typically random or industry specific.
It is highly recommended that industry members subscribe to receive email updates on the PST. To do this, register here: www.gov.bc.ca/pst. Instead of receiving every update, simply select “publications” to see only industry-specific bulletins (i.e. PST 116, Dealers and Leasing companies; PST 117, Dealer-use and Manufacturer-use formulas; PST 118, Vehicle Service and Parts; and PST 308, Vehicles). If you click a specific bulletin, you can request updates to that specific bulletin only. For specific rulings, email CTBTaxQuestions@gov.bc.ca, or call Taxpayer Services at 1-877-388-4440. ■