What is the PST?
Do I have to register my business?
You are required to register as a collector if you sell or lease taxable goods or services. Here are some common examples.
- In the ordinary course of your business, you:
- sell taxable goods like alcoholic beverages, motor vehicles, boats, building materials, household or office furniture
- lease taxable goods like motor vehicles, tools and equipment, aircraft and art work
- provide services to taxable goods like:
- repairing or maintaining automobiles, knives, watches, TVs
- applying protective treatments like fabric protection
- sell software
- provide legal services or telecommunication services
- provide four or more units of rental accommodation (apartment building
Not sure if this applies to you? Coastal Tax can help determine this for you. Once you have registered, you will receive a PST number in the format PST-1234-5678 and you are required to collect PST on your sales and file monthly remittances.
What if I am a Real Property Contractor?
You are a contractor if you supply and affix, or install, goods that become part of real property.
- The following are examples of contractors: Bricklayers, Cabinet installers, Carpenters, Carpet layers, Drywallers, Excavators, Electricians, Fence builders, Foundation contractors, Framing contractors, Glass and glazing contractors, Heating system installers, Home builders, Kitchen installers, Landscapers, Locksmiths, Masonry contractors, Mechanical contractors, Painters, Pavers, Plumbers, Roofers, Sheet metal contractors, Siding contractors, Sundeck builders, Window installers.
- You pay PST because you are the user of the goods used to fulfil the contract.
- You do not charge your customers PST.
- You are not eligible for the PST exemption for goods obtained for resale.
What is the PST exemption for goods obtained for resale?
The idea behind the PST is that the final consumer pays the tax on the goods. In the case of a contractor, the goods are required for their business to complete the contracted job. If you are a supplier, for example a furniture store, and you buy the furniture for re-sale from the manufacturer, you do not pay PST on the goods. You will charge the PST to the final consumer – the customer who buys the furniture from your store. To get the exemption from the manufacturer, you provide them with your PST number, and you are then considered “PST exempt”. If you do not arrange the PST exemption, the tax will essentially be paid twice on the same object, first by you, the store owner, and then again by your customer!
What is the difference between the PST and the GST?
The main difference is that the GST allows you as the business owner to claim Input Tax Credits (ITCs), whereas the PST does not. This means that when you pay GST on your expenses, you will be able to claim those amounts against the GST you have collected from customers when you file your GST return. The PST, unfortunately, does not work this way! You cannot claim your PST paid on expenses against the PST you have collected. Also, the GST is collected by the federal government, whereas the PST is collected by the provincial government. So… remind me again why I left Alberta?? Oh right, it was way too freezing cold! 🙂
I hope you enjoyed this post! Next up in “The Basics of…” series is The Basics of Source Deductions! Also starting soon is a new series called “Tax Tips”. Until next time!
About the Author:
Alicia Loewen is a certified Platinum QuickBooks Online ProAdvisor and the owner of Coastal Tax and Accounting Services on Vancouver Island, BC. Coastal Tax is a modern accounting firm and offers all services remotely using online and paperless software to make bookkeeping and tax preparation as painless as possible. Contact Alicia to set up a free consultation.
Please note this information is specific to BC.