While British Columbia (“BC”) had published two of three bulletins pertaining to the oil and gas industry in November 2013, they have only recently issued the third in the series, Bulletin PST 115, “Oil and Gas Industry – Service Providers”. However, the good news is that, in addition to other revisions, the previously released documents (Bulletin PST 113, “Oil and Gas Industry - Producers and Processors” and Bulletin PST 114, “Oil and Gas Industry - Exploration, Discovery and Development”) have also been updated to include appendices with examples of exempt and taxable items.
Subject to meeting all necessary criteria, the production machinery and equipment (PM&E) exemption from PST may apply to service providers to the oil and gas industry in two different ways: they may qualify for this exemption on their own purchases of such equipment, or if their customer is eligible, they would not charge PST on services to the PM&E.
This exemption would apply to any related parts, and most materials and services for qualifying PM&E ; however, there are certain parts or materials for PM&E will not qualify for exemption.
If PM&E or goods are supplied with an operator, it is considered to be a non-taxable service.
Other exemptions available to oil and gas service providers include:
- goods for resale or lease;
- goods incorporated into other goods for resale;
- containers and packaging materials; and
- safety equipment and protective clothing.
Unless otherwise exempted, PST is payable on the full purchase price (including financing, interest, customs and excise, as well as any delivery charges) of the goods. There are certain situations where the service provider must calculate and self-assess the PST. These include, for example, PM&E (or related parts and materials) that are purchased exempt from PST and subsequently used for taxable purposes, or if goods were purchased from out-of-province suppliers. In the first example, PST would be calculated on the greater of the depreciated value or 50% of the original purchase price. The bulletin includes a table for depreciation rates applicable to various types of equipment.
All three bulletins for the oil and gas industry include brief sections on real property contracts, affixed machinery, and tax payment agreements, which are also discussed in more detail in separate bulletins: Bulletin PST 501, “Real Property Contractors”; Bulletin PST 503, “Affixed Machinery”; and Bulletin PST 317, “Tax Payment Agreements”.