Posts

What you need to know about PST

PST calculator

Photo courtesy of 401(K) 2012

Effective April 1, 2013 BC will be eliminating HST and returning to the PST.

The new PST will be much the same as the old PST, a retail sales tax that applies when a taxable good or service is acquired for personal or business use, unless a specific exemption applies. GST will be 5% and PST tax rates will be:

  • General rate: 7% of the purchase or lease price.
  • Liquor: 10% of the purchase price.
  • Accomodation: 8% of the purchase price.
  • Vehicles: 7% – 12% of the purchase or lease price (including the surtax for passenger vehicles valued at $55,000 or more), or 7% – 12% of the fair market value if received as a gift.

What does this mean for my small business?

Now is the time to start planning! Your new PST number will not be the same as pre-HST. You must register in order to charge the new tax. Register and pay at www.etax.gov.bc.ca/btp/eservices or in person, by mail or fax. If you sell or lease taxable goods, software or services this means you. The penalties for late payment are significant, don’t let this affect your business!

What to do?

Develop a “de-harmonization” plan. Review all business operations and assess the impact the reversion is going to have on costs, systems, processes, and procedures.

  • Some purchases might be more advantageous to be made prior to April 1
  • Determine if your business will be able to absorb the additional PST costs, or if you will need to pass them on to customers in price increases
  • budgets and cash flows
  • contracts, sales invoices and other documentation
  • sales, purchasing and other systems
  • PST status of goods and services supplied
  • PST self-assessment procedures

Better yet have the Homeroom Team do this for you! $50 includes PST registration*, changing your accounting file, and consultation as needed.

* We will provide a checklist for you to follow, this information is required before you can be registered.

What’s taxable and what’s not?

  • Retail sales tax on a taxable good or service acquired for personal or business use
  • Purchase or lease of new or used goods
  • Taxable goods brought, sent or delivered into BC for use here
  • Software, services related to most taxable goods
  • Accommodation, legal services, telecommunication services
  • The lease of tangible personal property (goods) in BC for personal or business use, unless a specific exemption applies.

All former exemptions will be re-implemented, including but not limited to:

  • All food for human consumption (e.g., basic groceries and prepared foods such as restaurant meals)
  • Bicycles
  • Dry cleaning and tailoring
  • Newspapers and magazines
  • Exemptions for business (e.g., purchase of goods for resale, eligible machinery and equipment).

PST will not apply to most services, including: transportation services, personal services such as haircuts or massages and most professional services such as accounting or engineering services.

Download a detailed list here: What’s taxable?

Reporting and Remitting

Any PST that you charge must be paid and reported to the government regardless of if you have collected it from your customer. You must remit all PST charged within a reporting period no later than the last day of the month following the reporting period. For example, if you are reporting for a period ending June 30, you must file your return and remit the PST charged in that period no later than July 31.

Your reporting frequency will be determined at the time of registration based on how much PST you are estimated to collect per reporting period on sales and leases in BC. Reporting periods may be monthly, quarterly, semi-annual or annual.

Tax Collected per Year

Filing Frequency Options

More than $12,000

Monthly only

$6,000 – $12,000

Monthly or Quarterly

$3,000 – $6,000

Quarterly or Semi-Annual

Less than $3,000

Quarterly, Semi-Annual or Annual

If the amount of PST you regularly collect changes, you will be notified by letter by the government and your reporting frequency may be adjusted.

How do I pay?

·   Online: Starting April 1, 2013, you will be able to file your PST return (including Nil returns), make payments, manage your accounts and more online. The new online system, called eTaxBC, is intended to streamline business processes around reporting and remitting PST.

·   Internet Banking: Check with your financial institution to see if you can file your tax returns and make payments online through their website.

·   Mail: Send the remittance coupon, your payment and any required documentation to: The Director, Provincial Sales Tax, PO Box 9443 Stn Prov Govt, Victoria BC V8W 9W7

Commissions

Collectors who are registered as required are entitled to a commission for each reporting period in which they remit PST as required and on time. Collectors with more than one PST account may only claim commission on one of those accounts.

Tax Collectable

Commission

$22.00 or less

The tax collectable

$22.01 – $333.33

$22.00

More than $333.33

6.6% of tax collectable, to a maximum of $198.00

 

Retaining Books and Records

You must keep sufficient books and records to provide details of all the following:

  • all sales and leases (taxable and non-taxable)
  • all tax collected, remitted and commission taken
  • all purchases and leases for inventory and for your own use
  • all applicable supporting documentation to show why tax was not collected on taxable goods and services.

You must keep books, records and any documentation relating to your business for five years.

Rules:

·       PST will not apply to consideration in respect of the purchase of goods that becomes due on or after April 1, 2013 and is not paid before April 1, 2013.

What does this mean? If you invoice your client before April 1, but they pay on or after April 1, no PST will be applied.

·       PST will apply to consideration in respect of the lease of the goods that becomes due on or after April 1, 2013 and is not paid before April 1, 2013.

What does this mean? If you leased a vehicle prior to April 1 for a term that extends beyond April 1, your monthly payments will be subject to PST on all payments after April 1, 2013.

·       Tangible goods purchased in BC or brought, sent or received into BC by a person for the purpose of improving their own real property will be subject to PST, unless a specific example applies.

·       Goods purchased in BC or brought, sent or received into BC by a contractor for the purpose of fulfilling a contract under which the contractor is required to supply and affix, or install, affixed machinery or improvements to real property, and under the terms of the contract the goods will be used such that the goods cease to be personal property at common law, will be subject to PST, unless a specific exemption applies.

What does this mean? If a contractor purchases construction materials prior to April 1 but installs them on or April 1 the purchase price of the materials will be subject to PST. All materials purchased after April 1 will also be subject to PST.

·       The purchase of software for use on, or with, an electronic device ordinarily situated in BC for personal or business use will be subject to PST, unless a specific exemption applies.

·       Unless a specific exemption applies, tangible goods, brought, sent or delivered into British Columbia will be subject to PST.

What does this mean? You will be required to self-assess on a regular basis. More detailed information on how this will happen has not yet been provided by the BC government. We have kept up to date on the most relevant information, so please contact the Homeroom Team if you have any further questions.

 

Need more information?

Toll free in Canada: 1.877.388.4440

Email: CTBTaxQuestions@gov.bc.ca

http://pstinbc.ca/