Selling to BC? British Columbia Expands PST Registration Rules
Businesses selling into the province of British Columbia (BC) should be aware of proposed changes that may require them to register for BC provincial sales tax (PST). The proposals were announced in the Province’s 2020 budget and fiscal plan and would apply starting July 1, 2020. The proposals would impact both businesses located in Canada but not in BC and non-residents of Canada. In fact, non-resident e-commerce businesses may be required to register and collect BC PST even if they are currently not required for the federal Goods and Services Tax/Harmonized Sales Tax.
With these proposals, BC follows in the footsteps of Quebec which earlier introduced expanded registration requirements discussed here.
Currently, businesses located outside BC who sell into the province are generally required to register only if they have sufficient connection to the province. This is based on factors such as whether they carry on business in BC, solicit sales in BC, or hold inventory in BC. Different rules apply depending on whether the business is resident in Canada or resident outside BC but in Canada, and whether the business sells tangible goods, software or telecommunication services.
Some businesses may not be required to register under the current rules. However, this is poised to change with the new proposals. First, businesses in Canada but outside BC selling tangible goods are required to register if they merely cause goods to be delivered in BC, accept orders originating in BC, sell to person in BC for use or consumption, i.e., on a retail sale, and meet the $10,000 BC minimum threshold requirement (below). Solicitation or holding inventory in BC is no longer required.
Second, any business outside BC (including non-residents of Canada) that sells software or telecommunication service for use on or in relation to an electronic device ordinarily situated in BC will be required to register if the business accepts orders originating from locations in BC, meets the BC minimum threshold requirement and sell to persons in BC for use or benefit, i.e. at a retail sale. “Telecommunication services” is broadly defined and includes access to online music, videos, and books. As a result, non-residents providing digital content may now be required to register and collect BC PST if they meet the above requirements.
The BC minimum revenue threshold is $10,000 or more in gross revenue from all retail sales in the previous 12 months and $10,000 or more in estimated gross revenue from all retail sales in the next 12 months. Any supplier crossing this revenue threshold in previous 12 months or in upcoming 12 months will be potentially required to register.
Canadian businesses that sell goods, software and telecommunication services into BC but are not currently registered in reliance on the current rules should confirm if they are required to register starting July 1, 2020. This will likely require updating systems to track sales into BC, as well as identifying and forecasting relevant sales for calculation of the BC minimum threshold. To track digital sales, especially of telecommunication services or software, businesses may need clarification to determine whether the relevant electronic device is ordinarily situated in British Columbia.
Non-resident businesses, particularly those selling telecommunication services and software such as Netflix may be required to register for BC PST even if they are currently not required to register and collect federal Goods and Services Tax/Harmonized Sales Tax. Non-residents cannot assume they have no provincial PST obligations simply because they have no federal GST/HST obligations. Notably, the province has the authority under the Provincial Sales Tax Act to audit, issue assessment and charge potential penalties and interest regarding failure to register.
It is an open question, however, whether BC has the jurisdiction to impose and enforce these proposals against non-residents of the province. The provinces have limited jurisdiction under the constitution to impose taxes and other obligations on non-residents. There is genuine concern that BC may be over-stepping its jurisdiction with these rules.
With BC posed to join Quebec in expanded sales tax requirements, Canadian and non-resident businesses selling across and into Canada will face additional tax compliance obligations.
Disclaimer: This article is published for educational purposes only, it does not provide any legal advice. For more information and queries about how these proposals may affect your business or regarding general PST registration requirements, please contact us for more information and advice.
Thang Tax Law is a Toronto-based boutique Canadian Tax Law firm specializing in the areas of sales tax (GST/HST, PST), and customs and trade. Our goal is to give you the best solution for your unique situation. We provide smart, reliable advice and effective representation. We have helped many businesses and individuals, both within the country and abroad, in effectively strategizing their businesses and in disputes with the Canada Revenue Agency and other provincial authorities.