ARTICLE
5 January 2015

Did You ‘Use’ That?: Interpreting B.C.’s PST Legislation

ML
MNP LLP

Contributor

MNP is a leading national accounting, tax and business consulting firm in Canada. We proudly serve and respond to the needs of our clients in the private, public and not-for-profit sectors. Through partner-led engagements, we provide a collaborative, cost-effective approach to doing business and personalized strategies to help people and organizations succeed across the country and around the world.
The way the B.C. Provincial Sales Tax (PST) legislation is worded, PST is required to be paid on property that is "used" within B.C. But what does "use" mean?
Canada Tax

The way the B.C. Provincial Sales Tax (PST) legislation is worded, PST is required to be paid on property that is "used" within B.C. But what does "use" mean? Basically, if a person acquires something in B.C. and does anything other than ship it directly outside of the province, it will most likely be considered to be used in B.C. "Use" is defined so broadly, it is nearly impossible to escape.

Consider this scenario: You manufacture windows and doors in B.C., ship them to your customers in Saskatchewan and install the windows and doors for your customers (either with your own employees or with subcontractors).

Even though you manufactured these items with the sole purpose of sending them outside of B.C. to be installed for a customer, you are required to self-assess B.C. PST on all the material costs. Why? Because you are considered to have "used" the materials in your manufacturing process. Your cost of doing business just increased by 7%. To add insult to injury, you are also required to self-assess 5% Saskatchewan PST (on the labour and materials used to manufacture, plus transportation costs to Saskatchewan) because the windows and doors became real property upon installation in Saskatchewan. Unfortunately, B.C. and Saskatchewan don't care that you had to pay tax to both provinces.

Just because something is shipped out of B.C., it doesn't mean B.C. PST is not applicable. Remember, whether your organization has "used" something in B.C. is not a determination you can necessarily make with common sense.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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