The expanded registration requirements for British Columbia Provincial Sales Tax (“PST”) will come into effect on April 1, 2021. Under the new requirements, and where criteria are met, all Canadian and foreign providers of software and telecommunications services will be required to collect and remit PST at a rate of 7% from customers located in British Columbia.
New Registration Requirements
Out-of-province vendors will be required to register for PST if they meet all of the following requirements:
- They accept orders from customers located in British Columbia (e.g. by telephone, mail, email or internet) to purchase software for use on an electronic device ordinarily situated in British Columbia (the “Software”) or telecommunication services (the “Services”);
- They sell or provide such Software or Services to customers located in British Columbia; and
- In respect of the sale or provision of the Software or Services described above, they meet the following minimum revenue threshold:
a. If they are located in Canada (but outside British Columbia):
i. their gross revenue in the previous 12 months from all retail sales and leases of goods and all sales and provisions of Software and Services to British Columbia customers is more than $10,000; or
ii. their estimated gross revenue in the next 12 months from all sales and provisions of Software and Services to British Columbia customers is more than $10,000;
b. If they are located outside of Canada:
i. their gross revenue in the previous 12 months from all sales and provisions of Software and Services to British Columbia customers is more than $10,000; or
ii. their estimated gross revenue in the next 12 months from all sales and provisions of Software and Services to British Columbia customers is more than $10,000.
With respect to the first and second requirements, the location of stationary electronic devices (e.g. desktop computers, televisions, etc.) shall be determined based on the billing address or IP address of such a device. Likewise, the location of mobile electronic devices (e.g. smart phones) shall be determined based on their assigned area code. For other mobile devices that do not have an area code (e.g. a laptop or tablet) their location shall be determined based on the billing address or IP address associated such device. Given the broad definitions of “software” and “telecommunication service” under the Provincial Sales Tax Act (British Columbia), out-of-province sales of e-services such as Software as a Service (SaaS), Infrastructure as a Service (IaaS), and Platform as a Service (PaaS) to customers in British Columbia will be captured by the new registration requirements, in addition to the provision of traditional types of software and telecommunication services.
With respect to the third requirement, the calculation of “gross revenues” shall include both the sale of taxable and tax-exempt goods (for Canadian vendors only) and taxable and tax-exempt Software and Services (for Canadian and non-resident vendors). Further, because the calculation is based on a vendor’s actual or estimated gross revenue from a consecutive 12-month period, and not on a calendar year, if at any time a vendor’s gross revenue from sales of Software or Services in the previous 12 months exceeds $10,000, or the vendor’s estimated gross revenue in the next 12 months exceeds $10,000, the vendor must register for PST. Thus, an out-of-province vendor that does not currently meet the revenue threshold requirement should check on a monthly basis whether they continue to fall below the revenue threshold requirement.
Who is Not Required to Register
An out-of-province vendor does not have to register for PST in British Columbia under the expanded registration requirements if they meet any of the following conditions:
- All of the digital software and telecommunications services provided in British Columbia are non-taxable or are otherwise tax exempt (see Bulletin PST 200 – PST Exemptions and Documentation Requirements for a list of tax-exempt software and telecommunication services);
- The vendor is a wholesaler and does not make retail sales;
- The vendor does not meet the minimum revenue threshold described above; or
- The vendor provides software that is used only on electronic devices not ordinarily situated in British Columbia.*
*If an out-of-province provider is relying on this exception, documentation should be kept to evidence the location of the customers’ electronic devices to establish why PST was not collected.
How to Register
Out-of-province vendors can register to collect and remit PST online using eTaxBC, or by completing Form FIN 418 - Application for Registration for PST and submitting it via fax or mail to the British Columbia government. Once an application has been reviewed, the government of British Columbia will provide the out-of-province vendor with a letter advising them of their PST number and their ongoing reporting periods for their PST returns.
Obligations Once Registered
Out-of-province vendors that are required to register must charge and collect PST on the sale of Software or Services to British Columbia customers unless a specific exemption applies. Further, PST registrants are obligated to report and remit to the British Columbia government any tax charged, regardless of whether or not it has been collected from a customer. All taxes charged within a reporting period must be remitted no later than the last day of the month following the end of the PST registrant’s reporting period. For example, if a registrant has a reporting period ending April 30, the registrant must file their return and remit the PST charged in that period by May 31.
The motivation behind the introduction of the expanded registration requirements for B.C. PST seems to be the increase in online sales of Software and Services from vendors without brick and mortar stores in British Columbia. For example, last year when the changes to the PST Act were first proposed, the B.C. Ministry of Finance stated that “B.C. has had a sales tax in place since 1948 — that has not changed. However, as people have shifted to buying more and more goods and services online, legislation in many jurisdictions hasn’t kept pace. Clarifying registration requirements will future-proof our tax system as the shift to digital purchasing continues.” Thus, if an out-of-province vendor meets the requirements summarized above, they must be registered for PST (as of April 1, 2021) before providing Software for use on or with an electronic device ordinarily situated in British Columbia or Services to customers in British Columbia. Further, starting April 1, 2021, they must collect and remit PST on all taxable sales to British Columbia customers.
Kayli is an associate in Lawson Lundell’s Tax Law Group. She advises clients on corporate tax matters including tax planning, mergers and acquisitions, pension fund investment taxation, and sales tax issues. Kayli also assists ...
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