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Provincial Sales Tax Review

A competitive and streamlined tax structure benefits British Columbians by making it easier to do business, encourages business growth and investment, and promotes British Columbia as the most small-business-friendly jurisdiction in Canada. In turn, the economic benefits of a streamlined tax structure support the province’s great goal to lead Canada in job creation.

To this end, the Ministry of Small Business and Revenue, with the support of the Ministry of Finance, completed a review of provincial sales tax (PST) policies and legislation. The review sought to develop options to simplify, streamline and enhance the fairness of the sales tax. Results from the first phase of the review were announced in Budget 2007.

Over 2007/08, the Ministry of Small Business and Revenue conducted further reviews, focusing on specific issues that arose during the 2007 consultation process. Changes in Budget 2008 that flow from the PST Review are described below. These changes streamline, simplify, and clarify the tax for business across British Columbia. Detailed information on these changes is available on the Ministry of Small Business and Revenue website.

PST Exemption Provided for Bona Fide Farmers

Effective February 20th, 2008, bona fide farmers and aquaculturists are exempt from PST on purchases of qualifying all terrain vehicles acquired and used solely for a farm or aquaculture purpose. To qualify, ATVs must have an engine displacement of 200 cc or greater and must be equipped at the time of sale with a carrying rack, platform or cargo box.

Government will continue to review the application of the PST to farm equipment on an ongoing basis with a focus on streamlining and simplification.

Coloured Fuel Use in Farm Vehicles

Effective February 20, 2008, under the Motor Fuel Tax Act, authorized coloured fuel use in farm vehicles is expanded to allow all vehicles licensed as farm vehicles under the Commercial Transport Act to use coloured fuel when traveling for farm purposes on a highway. This change will ensure all farms qualify for the benefit regardless of business structure. As the existing family farm truck emblem program is no longer required, it is eliminated.

Work Related Safety Equipment Exemption Modified

Effective February 20, 2008, work related safety equipment and apparel worn by or attached to a worker and purchased to meet the requirements of the Workers Compensation Act or the Mines Act is exempt from PST if it is:

  • purchased by an employer for use by their employees in the course of their employment, or
  • purchased by a person who is self-employed for own use in the course of self-employment, or
  • purchased by a school board or similar authority for use in instructing students.

All workers continue to be exempt at the point-of-sale on the purchase of safety eyewear, footwear, head protection, hearing protection and gloves. In addition, the exemption for gloves is clarified and expanded to include any gloves with built in safety features, such as reinforced thumbs, cuffs or palms, that protect the wearer from physical injury. These changes support work safety and bring greater clarity and certainty to the exemption.

Tax Application to Real Property Improvements Clarified and Simplified

Effective with contracts entered into on or after October 1, 2008, a contractor is responsible for paying the PST on any tangible personal property used in the completion of a contract to improve real property, unless the contract explicitly states that the customer is liable for the tax. Where a customer would be eligible for exemption on some or all of the materials if that customer purchased them directly (e.g. First Nations, Diplomatic Corps, Farmers), the contractor is eligible to claim the exemption on the purchase of the materials. The current application of tax depends upon whether a contract is for time and materials or for a lump sum amount, but there are no clear guidelines for determining the nature of the contract. The amendments remove tax uncertainty by providing clear guidelines on the application of tax to real property contracts, and allows businesses to determine the type of contract they wish to establish with their customer. The delayed implementation is to ensure that contractors have sufficient time to become fully familiar with the new application and to make any adjustments required to their business processes.

Special Registration Number Introduced

Effective April 1, 2008, eligible businesses may enter into an agreement with the Ministry of Small Business and Revenue to obtain a special registration number. Using the registration number replaces the need to complete a certificate of exemption for purchasing exempt production machinery and equipment and to apply for a refund of tax paid on items purchased in the province and subsequently shipped out of province for use. The special registration number will allow eligible businesses to purchase qualifying inventory exempt, and to self assess tax on any items subsequently used for a taxable purpose.

To be eligible to enter into an agreement, the business must purchase a minimum annual inventory of $250,000 and

  • be eligible for exemption on the purchase or lease of production machinery and equipment, or
  • be eligible for a refund of tax paid on items purchased in the province, retained in inventory, and subsequently removed from the province for use outside of the province.

Application of PST to Trusts and Amalgamations Clarified

Public information has been developed to provide clear guidelines on the application of PST to transactions involving trusts and the amalgamation of companies or organizations. As well, the application of PST to transfers of assets involving family and spousal trusts are clarified in the regulations. This provides greater clarity and tax certainty for business and individuals.

Application of PST to Partnerships Clarified

Public information has been developed to provide clear guidelines on the application of PST to transactions involving partnerships. This provides greater clarity and tax certainty for businesses and individuals.

Definition of Well Head Simplified

Effective February 20, 2008, the term “well head” for purposes of the production machinery and equipment exemption is replaced with the term well site. The well site is the area identified as such in applications for approval to drill submitted to the Oil and Gas Commission. This aligns the exemption with industry practice and clarifies eligibility for exemption.

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