British Columbia (“BC”) has recently published two new PST bulletins: Bulletin PST 116, “Motor Vehicle Dealers and Leasing Companies” and Bulletin PST 315, “Rentals and Leases of Goods”.
Bulletin PST 116, “Motor Vehicle Dealers and Leasing Companies”
This bulletin contains comprehensive information for businesses in the motor vehicle sales and leasing industries.
Generally, PST will apply on sales of new and used vehicles by GST registrants, leases of vehicles, private sales in BC or given as gifts, and vehicles registered in BC. Depending on the type of vehicle and how it is acquired, different rates of tax may apply ranging from 7% to 10%, or 12%.
This document defines the purchase price to include:
- charges for financing, interest, other taxes and duties (but not GST), documentation, transportation and service charges, warranty and maintenance charges, trade-in amounts, and any other fees;
- GST, manufacturers’ rebates, insurance, licensing or transfer fees paid to the Insurance Corporation of British Columbia (ICBC) and the cost of certain modifications made for persons with disabilities.
It is important to note that the PST rate is based on the price before the trade-in value is deducted, but is applied to the taxable purchase price, net of the trade-in amount.
Included is a section on Modified Vehicles, which discusses tax on motor vehicles modified for persons with disabilities (the rate is based on the purchase price excluding the charge for the modifications and applied to this net amount) and modified business vehicles (the price to determine the tax rate excludes the modifications, but does not affect the taxable purchase price, i.e. the rate will apply to the total purchase price).
Lessors must charge PST where the lease is entered into in BC, the vehicle is located in BC, or the vehicle is delivered or made available to the lessee in BC. Similar to the sale price of a vehicle, the lease price includes any additional charges, but not repairs, reimbursements, fuel, deposits, or insurance charges, nor the option-to-purchase (this latter item is considered a separate transaction and is subject to PST as a sale).
Subject to meeting certain criteria and documentary requirements, some exemptions from PST do exist where:
- the vehicle is acquired for resale or lease;
- the vehicle is purchased for use outside BC; or
- the vehicle is acquired by specific persons for specific situations (e.g., members of the diplomatic or consular corps, First Nations individuals or bands, or the federal government).
Self-assessment of PST will apply where there is a change in use of vehicles.
A refund of PST paid may be granted where a refund of the purchase or lease price is given, where tax was paid in error, or the vehicle was removed from BC.
Bulletin PST 315, “Rentals and Leases of Goods”
Information on the rental and lease of goods is covered in detail in Bulletin PST 315.
PST generally applies to the lease of new or used taxable goods in BC. This document provides a broad listing of examples of taxable and exempt leases.
If proper documentation is provided, a sale and lease-back arrangement will be exempt from PST if the lessee previously paid tax (and did not receive a refund, credit or rebate) such as PST, tax on designated property (TDP), the BC portion of the HST or PST under the previous Social Service Tax Act.
While PST rates for taxable leased goods vary for passenger vehicles, manufactured mobile homes, manufactured modular homes, and portable buildings, the full 7% rate applies to freestanding appliances and furniture leased with these types of buildings, and on repair parts for manufactured buildings.
Lessors should know that goods supplied with an operator are considered a supply of a non-taxable service, which is not subject to PST.
Lessors are exempt from PST on goods (including parts and packaging materials) acquired for leasing to other persons, or to be occasionally supplied with an operator under an agreement. Where the latter applies, lessors must self-assess the PST (based on the normal lease price) each time the goods are supplied with an operator.
If a change in use occurs, the lessor must self-assess PST on the depreciated purchase price, which is calculated using a depreciation rate based on the type of equipment. Lessees are also obligated to self-assess PST if goods they lease are initially exempt, but subsequently used for a different purpose. As well, lessees who re-lease goods must also self-assess PST.
For a bundled lease (e.g., taxable and exempt goods, or taxable goods and real property), lessors must charge PST on the fair market value of the taxable goods.
A refund of PST paid may be granted where a refund of the purchase or lease price is given, where tax was paid in error, or the goods were removed from BC.