by Ron Clarke
If you sell goods or provide a service in B.C., is it always necessary to register and charge PST on the goods you sell or the service you provide?
A common question, and the short answer is, it depends.
Generally, the description goes like this.
If your business is located in B.C. and sells or leases taxable goods or provides software or other taxable services within B.C., you must register and charge PST
This definition is extended to businesses located outside of B.C. and selling into B.C., just as a B.C. business selling into another province may have to register and charge the PST applicable to that province.
What are taxable goods?
Some obvious examples include cars, boats, building supplies, furniture, furnishings, clothes, plus consumables such as pop, alcohol, tobacco, cannabis, and vape products.
Also, goods that are leased like vehicles, tools and artwork are also included as taxable goods.
Taxable services?
These are services provided to taxable goods like repairs and maintenance to vehicles, appliances, electronics and jewelry or the application of materials or protective services to taxable goods like furniture or vehicles.
Some specialized taxable services that don’t necessarily lend themselves directly with taxable goods include the sale and provision of software, telecommunications, on-line marketplace services, some specific types of accommodation and legal services.
But not accounting services.
Surprised? … perhaps to aid in the filing of tax returns!
Besides accounting services being exempt from PST, other exempt services include transportation and dry cleaning.
Non-taxable goods include most food products, children’s clothing, and non-motorized bicycles.
If you remove the food products from this list, it’s a pretty short list.
It’s also important to distinguish between retail sales and wholesale sales.
If your business “sells” goods to retailers who then sell those goods to consumers, your business is considered a wholesaler and is exempt from charging PST on your sales to the retailers.
What about the really small seller or service provider?
The B.C. government does recognize that there are many small businesses that will always remain small but nonetheless provide to their community, and collectively contribute to the economy, so the government offers the PST small seller exemption.
To qualify for the small seller exemption, first and foremost, the sales of taxable goods and services must not exceed $10,000 in any 12 consecutive month rolling time frame, the calendar year is immaterial.
If that test is passed, then all the following conditions must also be met.
The business must be located in B.C.
It must not operate within an “established premises,” in other words it has to operate out of one’s house, but the business can’t have its own dedicated separate space that acts as a retail shop or office within the house.
The business must sell only as a retailer, it can’t sell wholesale to retailers.
The business can’t sell taxable alcohol, tobacco, cannabis, vape products and almost all vehicles.
For service providers, the business can’t be a contractor service that sells taxable goods and then installs them within real property.
The service business can’t function as an independent sales contractor, it can’t be an on-line marketplace facilitator, and it can’t provide a service that leases taxable goods.
As a footnote to the $10,000 sales threshold exemption.
As the rule reads, the business owner must register for PST as soon as it’s realized that the $10,000 sales threshold will be surpassed, even if that realization occurs before the first sales dollar is earned.
Ron Clarke, owner of JBS Business Services in Trail, provides accounting and tax services.