List of Changes Resulting from PST Review Phase 1

Below is a list summarizing both the statutory and policy changes and further consultations that flow from the Provincial Sales Tax Review Phase 1. Click on a topic for more information.

Tax Remittances

Extension of remittance date

Effective April 1, 2007, under the Social Service Tax Act and the Hotel Room Tax Act, the due date for remitting tax returns and payments is extended from the 15th day to the 23rd day after the last day of the reporting period. For example, tax collected or payable in March 2007 is due on or before April 23rd. This responds to complaints from businesses of all sizes that the current remittance period of 15 days is too short, and imposes an unnecessary administrative burden on business.

Clarification of due date

Effective April 1, 2007, the Social Service Tax Act and Hotel Room Tax Act are amended to clarify that tax returns and payments are considered remitted on time if they are received by the province on the due date. For tax returns and payments sent by mail, courier or electronic means, the business must allow sufficient time for the return and payment to be received by the province on the 23rd of the month. This is a change from the return or payment being considered on time as long as the payment was sent on or before the due date. If the tax return and payment is made at a financial institution, the payment must be dated on or before the 23rd. Remittances delivered in person to a ministry or Service BC - Government Agent office must be received by that office on or before the 23rd. This clarification will provide consistent, streamlined rules for taxpayers and administrative efficiencies for government.

Tax return reporting frequency

Effective February 21, 2007, under the Social Service Tax Act and the Hotel Room Tax Act, the threshold for filing tax returns less frequently is increased. Businesses with annual tax remittances of $12,000 or less may qualify for quarterly, semi-annual or annual reporting frequencies, depending on the amount of tax remitted, the nature of the business and compliance history.

• Businesses remitting $3,000 or less in tax annually may be eligible to file tax returns and payments quarterly, semi-annually or annually.
• Businesses remitting from $3,001 to $6,000 in tax annually may be eligible to file tax returns and payments quarterly or semi-annually.
• Businesses remitting from $6,001 to $12,000 in tax annually may be eligible to file tax returns and payments quarterly or monthly.

In addition, businesses with special circumstances, such as seasonal operations, may be eligible for a customized filing frequency. Certain types of businesses, such as liquor vendors, are required to remit on a monthly basis. Businesses with poor compliance histories are unlikely to qualify for a reduction in their filing frequency. The increase from the previous threshold of $8,400 for less frequent remittances will provide greater flexibility for many small businesses to match their tax reporting frequency to their business needs. Businesses who are interested in changing their tax return reporting frequency should contact the ministry. More details on the filing frequency options and eligibility requirements are in the following notice: Notice to Vendors and Operators - Changes to Tax Remittances

Audits, Refunds and Record Keeping

Audit assessment period reduced

Effective February 21, 2007, under the Social Service Tax Act, Hotel Room Tax Act, Motor Fuel Tax Act and Tobacco Tax Act, audit assessment limitation periods are reduced from six years to four years. All tax assessments issued on or after February 21, 2007 will be limited to a maximum of four years, including assessments related to audits that began before February 21, 2007 but have not had a notice of assessment issued. The four year limitation period does not apply in cases of fraud, for which there is no limitation period. All businesses in the province, including over 100,000 businesses registered to collect tax, will benefit from this fairness initiative that reduces the impact of inadvertent errors and the amount of potential tax liabilities

Refund limitation period reduced

Effective May 1, 2007, under the Social Service Tax Act, Hotel Room Tax Act, Motor Fuel Tax Act and Tobacco Tax Act, the limitation period for applying for a refund is reduced from six years to four years. All refund applications received on or by April 30, 2007 qualify for the six year limitation period. All refund applications received on or after May 1, 2007 will only be eligible for a refund of tax paid for a maximum of four years after the date on which tax was paid.

Applications for refunds of tax paid more than four years ago but within the current six year limitation period, must be received by April 30, 2007 to have the refund claim considered. For example, if you have an outstanding refund claim relating to tax paid between May 1, 2001 and May 1, 2003, the refund claim must be received by April 30, 2007.

This change does not eliminate any rights to refunds of tax. It simply reduces the time in which a refund may be claimed, and maintains the consistency between audit and refund limitation periods.

Record retention period reduced

Effective February 21, 2007, under the Social Service Tax Act, Hotel Room Tax Act, Motor Fuel Tax Act and Tobacco Tax Act, record retention periods are reduced from seven years to five years. Businesses are now required to retain provincial sales, hotel room, motor fuel and tobacco tax related records for a period of at least five years instead of seven years. This change is a result of the reduction in the audit assessment period, and reduces the record keeping burden for over 100,000 businesses that collect and remit tax as well as for other persons carrying on business in the province.

Audits of liquor licensees

Effective February 21, 2007, audit assessments of liquor licensees for variances between the amount of tax remitted on liquor sales and the amount of tax expected based on liquor purchases will be reduced from a six year period to a maximum three year period. This measure enhances fairness for liquor licensees by providing tax treatment equivalent to other retailers with variances between their purchases and sales.

Registration and Collection Threshold

Effective February 21, 2007, persons who meet all the following requirements are not required to register as a vendor, or to collect and remit tax on their sales:

• have annual gross sales of $10,000 or less from sales of all tangible personal property, other than liquor, motor vehicles (including snowmobiles and all terrain vehicles), vessels (including personal watercraft), aircraft or parking rights,
• do not regularly make sales or leases from established commercial premises,
• and
• do not maintain established business premises.

Persons that meet the above requirements and who choose not to register:

• must pay tax on all items purchased for resale, including items used to make other items for sale,
• must keep records of their sales, and
• must not collect tax on their sales.

This $10,000 threshold removes the responsibility of collecting and remitting tax from approximately 20,000 small home-based craft persons and non-profit organizations that only make infrequent sales.

For more information on the eligibility criteria, please see the following notice: New Registration and Collection Threshold

Exemptions

Oil and gas exploration and development

Effective February 21, 2007, the PST exemption for production machinery and equipment used exclusively in the exploration for, discovery of, or development of petroleum or natural gas is expanded to include the following equipment:

• portable doghouses, winches, pickers, and boilers and steamers required for heating blowout preventors, but not including the automotive unit on which this equipment is transported
• parts of a pump truck, including pumps, tanks, lines, pipes, controls, manifolds, drop boxes, mixing hoppers, valves, engines, and transmissions, but not the automotive unit on which the parts are transported.

This expansion clarifies that equipment used with a truck-mounted service rig is also exempt.

Roadside tire services

Effective February 21, 2007, emergency roadside tire changing services for motor vehicles are exempt from PST. Previously, tire changing services were the only emergency roadside service subject to tax. As of February 21, 2007, tax exempt emergency roadside services will now include battery boosting, vehicle towing and roadside tire changing. Extending the exemption to tire changing eliminates a complexity for business.

Prescription drug samples

Effective February 21, 2007, prescription medications provided for promotional purposes by pharmaceutical companies to a physician, dentist or veterinarian are exempt from PST. Previously, prescription medications were only exempt when purchased by consumers. The extension of this exemption to samples of prescription medications enhances fairness by removing an anomaly under which samples of non-prescription medicines are exempt but samples of prescription medicines are not.

Catalysts and direct agents

As a result of the Review a recommendation was made to change the exemption for catalysts and direct agents used in a chemical reaction for the manufacture or transformation of a product for sale or lease. The recommendation was to expand the exemption to all substances used in the production process that are integral to the production (transformation of materials into products for sale or lease), even if they do not come into direct contact with the materials being manufactured.

In January 2007, a decision of the British Columbia Court of Appeal effectively broadened the exemption for catalysts and direct agents from the previous interpretation. While the result is not identical to the recommendation arising from the Review, it does expand the exemption.

Rather than implement the recommendation for catalysts and direct agents, Government will administer the exemption in accordance with the Court of Appeal's interpretation. Government is currently analyzing the Court's decision to determine how the exemption will be administered. More information will be posted on the ministry website as it becomes available.

Clarifying and Streamlining Tax Applications

Bare leases and lease with operator

Effective February 21, 2007, the application of tax to equipment acquired for lease and occasionally supplied with an operator is simplified. Under the new provisions, business that occasionally use equipment from their lease inventory under an agreement to supply the equipment with an operator will only be required to pay tax on the normal lease price of that equipment. The equipment must be in and remain part of the regular lease inventory in the accounting records of the business. If the equipment was previously fully tax paid, no additional tax is required.

Previously, when equipment normally rented without an operator was used for rental with an operator supplied, the lessor was required to pay tax on the full depreciated cost of that equipment at that time. This change eliminates the need for such businesses to maintain two separate inventories.