Sales taxes: New measures coming into effect on April 1, 2013

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The Order wishes to remind you that three major changes will affect the application of Canadian sales taxes as of April 1, 2013.

British Columbia returns to a PST/GST system

On April 1, 2013, British Columbia will replace the HST system to which it adhered in 2010 by a provincial sales tax (PST) system that will apply independently from the GST.

In a referendum held in the province in 2011, a majority of voters (54.73%) declared themselves in favour of eliminating the HST. As a result, the government committed to transition the province back to a PST system as quickly as possible and the new Provincial Sales Tax Act received royal assent on May 31, 2012.

The new PST legislation is not identical to the PST legislation that was replaced by the HST in July 2010. It has been modernized and streamlined to reflect changes in technology and business practices. However, although the legislation seems different, it is intended to apply in substantially the same way as the old PST legislation.

Generally, the PST rate will be 7% and the tax will not apply on top of the GST. It will be payable when tangible property and certain services (e.g.: accommodation, legal services, telecommunication services) are acquired for personal or business use. Some exemptions will apply.

It is important to note that, with certain exceptions, the PST is not recoverable for businesses in commercial activities, unlike the GST/HST.

Online registration is now open and Quebec businesses currently operating in British Columbia must determine if they need to register by next April 1.

The Canada Revenue Agency and the British Columbia government have each posted on their Web sites transitional rules regarding the application of the HST and PST to transactions that straddle the transition date. The recently approved Act and its regulations  are available on the British Columbia government Web site. You may wish to consult this information to better understand your obligations or those of your clients, and to avoid any errors that could lead to assessments.

Prince Edward Island harmonizes its sales tax

On April 1, 2013, Prince Edward Island will implement a harmonized sales tax (HST) system. The province will thus eliminate its current 10% PST. The shift to the HST was announced in the provincial Finance Minister’s 2012 annual budget address. The new HST rate will be 14%, consisting of a provincial portion of 9% and a federal portion of 5%.

The Federal and Quebec governments will pay QST and GST

As of April 1, 2013, the Federal government, the Quebec government and their respective agencies will be required to pay GST and QST on their acquisitions of taxable supplies. Currently, the Federal government and some of its agencies are exempted from paying QST, although they are required to pay GST. The Quebec government and some of its agencies, for their part, are exempted from paying either.

Gérard Durocher, CPA, CA
Raymond Chabot Grant Thornton
Member of the Order’s Technical Working Group on Taxation and Commodity Taxes