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BC Harmonized Sales Tax (HST)
British Columbia harmonized its provincial sales tax (Social Services Tax, aka PST) with the Federal goods and services tax (GST) effective July 1, 2010. The Consumption Tax Rebate and Transition Act, which eliminated the PST and prepared BC for the HST, was passed in the BC legislature on April 29, 2010.
Effective April 1, 2013, BC's 12% HST was replaced by the GST and the PST. As a result, the BC basic personal amount tax credit was reduced for 2013 (eliminating the increase that was done due to the implementation of the HST), the quarterly HST credit was eliminated, and the refundable Sales Tax Credit was reintroduced. See the BC 2012 Budget page for more information on these items, and for information on the increased HST rebate threshold for new home purchases.
Our BC PST page has information regarding the PST, which we have reviewed and updated relating to the re-implementation of the PST.
The federal Department of Finance has published proposed transitional rules, which describe how and when the HST would cease to apply to transactions that straddle the BC HST end-date.
Canada Revenue Agency has published the following notices regarding elimination of the HST in BC in 2013:
The BC HST Referendum, done by mail-in ballot, closed on August 5th. The results were 54.73% in favour of extinguishing the HST. This meant a return to the archaic PST system.
It was announced in a Ministry of Finance news release on August 26th that it is expected to take a minimum of 18 months to re-implement the PST system.
The HST in BC website did a good job of presenting the facts. It was a non-partisan website, now unavailable.
On May 25, 2011, the BC government announced in a news release that if the HST is kept, the rate will be reduced to 11% on July 1, 2012, and to 10% on July 1, 2014. Also, one-time payments of $175 per child will be issued to families with children under 18 years old, as well as to low- and modest-income seniors.
See our article on Why the HST is good for BC.
About the HST
The previous PST rate in BC was 7%, which, when combined with the GST resulted in a harmonized sales tax (HST) rate of 12%.
The implementation of HST in BC will be good for the economy, which will be good for job-seekers and consumers. It removes a consumer tax (PST) which is costly for businesses and government to administer. Even a small business (such as a self-employed person) which is not required to register to collect GST has to register to collect PST if it sells or provides any amount of a product or service which is subject to PST. The government has auditors who must audit businesses, businesses have accountants who must report on and remit the tax, and too often, lawyers and the courts are brought into the picture because the Social Services Tax Act has many parts that are open to interpretation. The implementation of the HST eliminates an entire level of bureaucracy, which is always a good thing!
There will be a slight increased cost to consumers to start, but because this is a consumption tax, those who spend the most will pay the most. Those with low incomes will be affected the least, because they spend the least, and a higher proportion of items purchased by low-income people are not subject to HST, such as basic groceries, housing, residential energy, and insurance.
Another advantage of going to HST is that tax will no longer be payable on most used goods purchased privately. However, used vehicles, aircraft and boats purchased privately (not from an HST registrant) would still be subject to provincial sales tax, which is being increased from 7% to 12%. If an HST registrant purchases a used vehicle privately, the 12% PST paid on the transfer of the vehicle is not recoverable as an input tax credit.
Almost everything that was subject to PST when purchased new was also subject to PST when purchased used. Exceptions to this were used clothing or footwear priced at less than $100, and certain used manufactured homes. Most people were not aware that the Social Services Tax Act required them to remit the tax to the government when they bought used goods privately, or when they purchased something from an out of province seller. We would guess that most people didn't remit the PST on this type of item, and were therefore in contravention of the Social Services Tax Act.
Businesses which are registered to collect GST or HST can claim input tax credits to recover the GST or HST that they have paid, with certain temporary exceptions for large businesses (see below). The change to HST will mean a significant savings and boost in productivity for businesses in BC, because:
There are temporary restriction on input tax credits on certain items for large businesses (generally, those with over $10 million of taxable, including zero-rated, sales) and financial institutions. The restriction only applies to the provincial portion of the HST.
What is Taxable?
Consumers now have to pay 12% HST on all goods and services on which they previously paid 5% GST, except for several items which were previously PST exempt and are not subject to the provincial portion of the HST. These items are:
In their September 2009 Budget Update, the provincial government announced that it will provide a provincially administered HST exemption for residential energy use. This was included in their HST backgrounder (pdf) document.
Previously, farmers were exempt from paying PST on the cost of many items purchased for use in the farming business. If a farmer is registered to collect GST/HST, any HST paid on costs for the farming business are recoverable as input tax credits. As most agricultural products are zero-rated (they are considered taxable, but the HST rate is zero), very little or no HST would be collected. Many farmers are small suppliers, so registering to collect GST/HST is not mandatory, but may be to their advantage in order to recover HST paid. See Who has to register to collect GST/HST?
Transitional rules are required to determine which tax - the existing PST (Social Services Tax) or the BC component of the HST - would apply to transactions that straddle the July 1, 2010 implementation date.
November 18, 2009 - New home sales - Grandparenting
May 1, 2010
Some items addressed in the HST transitional rules:
- Rebate threshold and transitional rules for new housing - no longer available
- Point-of-Sale Rebates for BC HST - no longer available
Canada Revenue Agency information:
- Notice246 Harmonized Sales Tax for BC - Questions and Answers on Housing Rebates and Transitional Rules for Housing and Other Real Property Situated in BC.
- GST/HST Information Sheets: Transition to the Harmonized Sales Tax:
- GST/HST Information Sheets: Harmonized Sales Tax:
Revised: November 01, 2017
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