British Columbia’s 2018 budget expanded and extended a number of income tax credits, but it also ushered in a new property transfer tax and made changes to several provincial sales taxes. PST was increased on some items and newly assessed on others. The rules were also clarified in some murky areas. If you represent clients who buy or sell any of the affected items, you should make sure they understand the changes.
Increased Tax on Luxury Passenger Vehicles
As of April 2018, all passenger vehicles worth $125,000 or more face increased sales tax. Vehicles worth $125,000 to $149,999.99 face 15%
PST, and vehicles worth $150,000 and over are taxed at a rate of 20%. In the past, all vehicles in these categories were taxed at 10% or 15% for private sales or gifts. Now, the higher tax rates apply in both situations.
The PST on other passenger vehicles stayed the same, and for GST registrants, the tax rates are as follows:
- Less than $55,000 – 7%
- $55,000 to $55,999.99 – 8%
- $56,000 to $56,999.99 – 9%
- $57,000 to $124,999.99 – 10%
For private sales and gifts, the tax rate is 12% on all cars worth less than $125,000. For example, if you have a client who owns a car lot and sells a vehicle for $40,000, they should collect and remit $2,800 in PST. That’s $40,000 x 0.07. In contrast, if you have an individual client who purchases a used vehicle in a private sale from a friend, they should pay $4,800 in PST. That’s $40,000 x 0.12.
Sales Tax Registration for Online Accommodation Platforms
The 2018 budget also created provisions to allow online accommodation platforms to register as sales tax collectors. As of May 2018, the province has only made arrangements with Airbnb, but other online rental platforms such as VRBO may soon follow suit. Airbnb plans to collect 8% PST and up to 3% local sales tax. That agreement brings Airbnb closer to paying the sales taxes faced by traditional hotels.
Changes to the Use of Municipal and Regional District Tax
Thanks to the agreement explained above, municipal and regional tax districts may collect more tax in the upcoming years, and luckily, the 2018 budget has expanded how they can use these taxes. In the past, the taxes were earmarked for tourism and marketing programs or projects related to tourism. Now, municipalities, regional districts, and others that collect these sales taxes can also use them for affordable housing initiatives. In fact, this is one of the many reasons the province implemented a speculation tax and decided to start collecting sales tax from online rental platforms. It’s trying to find ways to keep housing costs under control.
Tax Exemption for Avalanche Airbag Backpacks
The province has sales tax exemptions for certain safety equipment and protective clothing. The list includes acid-resistant footwear, ear plugs, gas masks, and ice cleats, as well as many other items. This safety gear is designed to be worn for work, and it has to meet certain standards. But these items are always tax exempt, even if someone purchases them for personal use. As of the 2018 budget, the province added all avalanche airbag backpacks to the list of exempt items.
PST on Cruise Ships
The provincial government also decided that retailers on cruise ships in B.C. waters don’t have to pay sales tax. The decision was a long time coming, and it’s been retroactively applied to April 1, 2013. If you represent any retailers who do business on cruise ships, you may want to let them know that they don’t have to collect PST on their sales.
If they’ve already remitted sales tax for that time period, you may want to help them apply for a refund. Keep in mind that in British Columbia, you only have four years from the date of payment to request a refund.
PST on Software in Optional As-Needed Maintenance Agreements
Also retroactive to April 2013, PST is levied on software provided in optional as-needed maintenance agreements. An optional agreement simply means it’s not mandatory. In some cases, you have to purchase a maintenance agreement when you buy software, and those agreements are considered mandatory. The phrase "as needed" simply implies you only get the services as needed. In contrast, some agreements provide scheduled service or updates.
This software was always subject to sales tax, but unfortunately, the rules weren’t that clear. As of 2018, the PST on software is 7%, but there is no PST on software-related services such as installation or restoration. As a result, when you purchase a maintenance agreement, you generally pay tax on any software or updates but not on services.
Changes to Tax Payment Agreements
The provincial government allows certain businesses to defer their PST payments using tax payment agreements. And as of 2018, qualifying commercial rail service providers can use their TPA numbers to purchase certain items without paying PST. Eligible expenses include railway rolling stock and parts. Your clients can’t use their TPA number to avoid PST on accommodations, legal expenses, or telecom services.
In addition to these changes to provincial sales tax, the 2018 budget also made changes to tobacco, motor fuel, and carbon taxes. If your clients deal with any of these items, make sure they have tools in place to help them calculate their sales tax, and to make your services more valuable, you may want to offer to help with their sales tax registration and reporting requirements.