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.
Return to the PST April 1, 2013
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:
Notice270 Questions and Answers
276 Transitional Rules for Real Property Including New Housing
BC HST Referendum
The BC HST Referendum, done by mail-in ballot, closed
on August 5th. The results were 54.73% in favour of extinguishing
the HST. We are now going back 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.
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.
Input Tax Credits
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,
Farmers in BC
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 for BC 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
November 18, 2009 - New home sales - Grandparenting
Where written agreements of purchase and sale are
entered into on or before November 18, 2009, and both ownership and
possession of the homes are transferred under the agreement after June
2010, the sales will be subject to the federal component of the HST, but
not the provincial component. This would apply to sales of newly
constructed or substantially renovated single-unit homes to individuals,
and to sales of residential condominiums to all persons including
Sales of these grandparented homes would not be
eligible for the new housing rebate or new rental housing rebate.
October 14, 2009
Certain purchasers that are non-consumers
to self-assess the BC component of the HST on consideration that becomes
due, or is paid, after October 14, 2009 and before May 1, 2010 for goods and services provided on or after July 1, 2010.
This would not apply if the non-consumer is a GST registrant and would
therefore be entitled to an input tax credit.
Note: Consumer means an individual
who acquires goods or services for the individual's personal consumption
or use or for the personal consumption or use of another individual.
A GST registrant in BC or Ontario should not be
collecting the provincial portion of the HST prior to
May 1, 2010, for goods or services provided in BC or Ontario, even
if the goods or services are to be provided on or after July 1,
2010. Prior to May 1, only the 5% GST should be collected for these
goods or services.
May 1, 2010
The HST would generally apply to consideration that
becomes due or is paid on or after this date, for property and services
provided on or after July 1, 2010.
Some items addressed in the HST transitional