Provincial Sales Tax Review

What is the Provincial Sales Tax?

Provincial sales tax is the provincial retail sales tax imposed under the Social Service Tax Act. It applies to sales and leases of goods and to some services, such as services to repair and maintain taxable goods. The tax is payable by the person who purchases or leases the goods, unless the item is specifically exempt from tax under the Act.

The provincial sales tax contributes over $4 billion to government revenues each year. It is an important source of funding which is used to support our province's roads, schools, hospitals and other community services.

What was the purpose of the review?

The purpose of the review was to consult with small business, industry and individual British Columbians on ways the provincial sales tax can be improved. The goal of the review was to develop revenue neutral options for changes to PST policies, legislation and related processes that would simplify, streamline and enhance the fairness of the tax.

What does revenue neutral mean?

Revenue neutral means that the government's overall fiscal situation remains the same in the short term.

If, for example, a proposed change to the provincial sales tax system is to create an additional exemption from the tax that will reduce revenue, the government must find a way to make up that shortfall in the short term to ensure funding for schools, hospitals, roads and other community programs.

What was the review process?

During PST Review Phase 1, the Minister of Small Business and Revenue invited small business, industry and individuals to attend one of 20 PST Review consultation meetings in regions across British Columbia or to send written submissions by mail, email or facsimile.

Persons wishing to make written submissions were asked to provide answers to the following questions:

• what are your key Provincial Sales Tax concerns, and why are they a problem?
• how can we fix them?
• is it revenue neutral?
• how can we make the Provincial Sales Tax more fair, streamlined and simpler to understand?

PST Review Phase 2 consisted of further consultations in specific areas identified in Phase 1.  Written submissions via mail, email, or facsimile were invited on discussion papers that were released in the summer of 2007 and 5 in-person sessions were held on contracts to improve real property.  As well, direct consultations with industry associations were held as required.

What were the timelines?

Submissions for the Provincial Sales Tax Review Phase 1 were accepted from December 2005 until May 1, 2006. Based on the results of the consultations, options for addressing concerns were developed for consideration as part of the preparation of the 2007 Provincial Budget.

Consultations and submissions for Provincial Sales Tax Review Phase 2 were held in August and September 2007.  Based on the results of the consultations, options for addressing concerns were developed for consideration as part of the preparation of the 2008 Provincial Budget.