Both Provinces of British Columbia (“BC”) and Saskatchewan (“SK”) recently announced provincial sales tax (“PST”) updates that may impact certain suppliers who do not have a physical presence in the BC or SK and supply goods or services in BC and SK. We will also summarize the existing Quebec and Manitoba requirements for businesses outside of those provinces.
General Comments on Sales Taxes:
Generally, PST in BC, SK and Manitoba apply to sales of taxable goods and some services. There are exemptions for goods purchased for resale, and some manufacturing and processing activities. If your only activities are selling goods to a customer who will resell the goods, PST will generally not apply.
British Columbia Extended PST Registration Requirements:
The Government of BC announced changes that expand the registration requirements for BC PST.
Taxable services for BC purposes include services related to tangible property in the province, legal services, accommodation and telecommunication services. Under the current rules, suppliers are grouped into three categories:
- Businesses located in BC:
Registration required if there are taxable sales in BC.
2. Business located in Canada but outside BC:
Tangible Property Sales: A supplier in Canada but outside of BC is required to register and collect BC PST if they do all the following in the ordinary course of their business:
- Solicits sales in BC by advertising or any other means (e.g., in person, by telephone, mail, email, fax, posters, etc.).
- Accepts purchase orders originating in BC (including by telephone, mail, email or internet).
- Sells or provides tangible personal property to a person in BC for use or consumption; and
- Causes the tangible personal property to be delivered in BC (e.g., delivery by the non-resident, or shipped by arrangement of the non-resident by a common carrier arranged by the non-resident, etc.)
Fulfillment House – A Canadian supplier is also required to register and collect BC PST if they, in the ordinary course of business, sells taxable goods to customers in BC, accepts orders from customers located in BC, and holds inventory for their customers in BC at the time of sale (e.g., using a fulfilment house in BC).
Supply of Software or Telecommunication Services – Under the current rules, a Canadian supplier is required to register and collect BC PST if they do all the following in the ordinary course of business:
- Solicits persons in BC for orders to purchase software for use on or with an electronic device ordinarily situated in BC or a telecommunication service.
- Accepts orders to purchase software for use on or with an electronic device ordinarily situated in BC or a telecommunication services, if the orders to purchase originate from locations in BC; and
- Sells or provides software for use on or with an electronic device ordinarily situated in BC or a telecommunication services to a person in BC for use.
3. Business located outside of Canada:
Tangible Personal Property – Under current rules, a supplier outside of Canada is required to register and collect BC PST if they do all the following in the ordinary course of their business:
- Sell taxable goods to BC customers.
- Accepts orders from customers located in BC; and
- Hold the goods you sell to your BC customers in inventory in BC at the time of sale (including using a BC fulfillment house)
Therefore, under the current rules, suppliers outside of Canada who did not have inventory in the province were not required to register for BC PST.
The Government of BC implemented major changes to registration requirements for suppliers located outside of BC. These rules are effective as of April 1, 2021.
Supply of Tangible Personal Property:
Canadian entities only – The Government of BC removed the solicitation requirement and introduced a new revenue threshold for a supplier. If Canadian supplier of taxable tangible personal property has or estimates to have revenue of $10,000 of taxable sales within a prior or prospective twelve-month period from orders originating from BC and for delivery in BC, the supplier will have to register and collect BC PST.
Supply of Software or Telecommunication Services
Canadian and non-resident entities – Like the rules for tangible personal property, the Government of BC expanded the registration requirements for the supply of software and telecommunication services (including digital services) in BC by removing the solicitation requirement. A supplier will be required to register and collect BC PST on software provided for use on or with an electronic device ordinarily situated in BC or telecommunication services provided to a person in BC if the non-resident supplier has or estimates to have revenue of at least $10,000 of taxable sales within a prior or prospective twelve-month period from all sales and provisions of software and telecommunication services.
Saskatchewan Introduced New PST Rules for Property or Services Provided Through Online Platforms
SK PST applies on the sale or lease of tangible property, and to some services. Taxable services include accounting, advertising, architectural services, computer services, legal services, engineering services, real estate services, repair or installation work, and veterinary services. This is not a complete list.
Computer services include pre-written software or applications, custom software, labour for computer related services, license fees for software or computer systems, and most other computer related activities.
Businesses located outside of SK that make retail sales in the province, including the sale or lease of tangible personal property, taxable services, or contracts of insurance are required to become licensed to collect and remit PST.
The Government of SK introduced retroactive changes to SK PST requirements for operators of electronic distribution platforms, operators of accommodation platforms, and marketplace facilitators. Prior to the changes, the Government of SK required persons, who carry on business in SK, to be licensed for the purposes of collecting and remitting SK PST if they sell or supply tangible personal property, insurance, and taxable services to customers in SK.
The amendments include the new definitions for the following items:
- Electronic distribution platform
- Online accommodation platform
- Marketplace facilitator
- Marketplace seller
The definition of “taxable service” was also amended to include electronic distribution services that are delivered, streamed, or accessed through an electronic distribution platform (such as eBooks, movies, television shows and music) and accommodation services offered through online accommodation platform.
According to the new rules, operators of electronic distribution platforms and online accommodation platform, as well as online marketplace facilitator must be licensed for the purposes of collecting and remitting SK PST when the corresponding service is being consumed in SK or in relation to a SK location. This moves the obligation to collect proper sales taxes to the online provider rather than the ultimate supplier.
Electronic Distribution Platform:
The new definition of “electronic distribution platform” includes websites, internet portals, gateways and applications that allow consumers or users to purchase electronic distribution services that are delivered electronically.
Note that existing PST exempt goods or services, such as exempt books, tuition or course fees, or personal counselling services, do not become taxable when they are offered or provided through an electronic distribution platform.
Online Accommodation Platforms:
The new definition of “online accommodation platform” means an electronic marketplace that enables or facilitates transactions in relation to accommodation services location (such as Airbnb) in SK. However, online platforms providing classified advertising or listing services, that do not collect payment on behalf of the individual or business offering accommodation services (“accommodation service provider”) through their platforms, are not considered to be online accommodation platforms (such as Kijiji).
The new definition of “marketplace facilitator” means a person that makes or facilitates a marketplace for sales to consumer or business in SK, and who collects payments from customers on behalf of the marketplace sellers (such as Amazon).
The new definition of “marketplace seller” means a person that makes retail sales through any physical or electronic marketplace operated, owned or controlled by a marketplace facilitator.
Pursuant to these changes, operators of electronic distribution platforms or online accommodation platforms and marketplace facilitators are required to be licensed for the purposes of collecting and remitting SK PST on taxable services provided to customers in SK or accommodation services in SK.
The accommodation service provider or marketplace seller is responsible for collecting and remitting SK PST on sales made through all other channels, including sales made through unregistered online accommodation platforms and unregistered marketplace facilitators. However, an accommodation service provider or marketplace seller, who makes retail sales exclusively by way of an online accommodation platform or a marketplace facilitator, is not required to be licensed as a vendor to collect and remit SK PST, when the operator of the online accommodation platform or the marketplace facilitator is licensed as a vendor to collect and remit SK PST.
Manitoba Registration Requirements for Businesses Outside of Manitoba:
Out-of-province businesses that sell/lease taxable goods to Manitoba purchasers who are acquiring the goods for consumption or use in Manitoba (not for resale), are required to be registered as a vendor under the Act and to collect the RST if:
a) The seller
i. causes the goods to be delivered in Manitoba, i.e., delivered by the seller, or shipped by arrangement of the seller by common carrier, whether or not the goods are shipped at a specified cost to the customer,
ii. solicits the order for the sale in Manitoba, directly or through an agent, by advertising or any other means, e.g., in person, by telephone, mail, e-mail, fax, posters, television or newspaper advertisement, and
iii. accepts orders originating in Manitoba to purchase tangible personal property. The order can be originated by telephone, Internet, e-mail, fax, letter or any other means from a location in Manitoba to the seller or agent located in or out of Manitoba; or
b) The seller holds inventory of taxable goods in the province.
Therefore, if you do not solicit for sales or hold inventory in the province, registration is not required.
Quebec Registration for Businesses Outside of Quebec:
QST has similar rules to the GST/HST system. Tax applies on most supplies or services and there is no resale exemption to paying the tax. The current rules require the following types of entities to register for QST or a simplified version of QST:
Businesses that have a permanent establishment in Quebec or carry on a business in Quebec:
Registration for QST is required.
Businesses located in Canada who do not have a registration requirement above:
A GST/HST registrant who sells goods, services, or intangibles to Quebec consumers that total more than $30,000 in a year must register to collect QST. A Quebec consumer would generally be an individual. Therefore, sales to Quebec businesses are not part of the requirements.
The registration system is a simplified version of the QST.
Suppliers located outside of Canada:
A supplier that sells intangible property or services to Quebec consumers is required to register for a simplified version of the QST where their sales to Quebec consumers are more than $30,000 in a year.
Note that if the supplier outside Canada is also registered for GST/HST, they are treated the same as a business in Canada. Therefore, the sale of goods to Quebec consumers would also be relevant where the non-resident is registered for GST/HST.
Digital platform suppliers:
The operator of a digital platform may be required to register for QST where they sell services or intangibles to Quebec consumers.