British Columbia (“BC”) has recently published three new PST bulletins: Bulletin PST 136, “Concrete”, Bulletin PST 313, “Administrative Materials” and Bulletin PST 317, “Tax Payment Agreements” containing wide-ranging provincial sales tax (“PST”) information for businesses. BC also issued a new consumer tax bulletin, Bulletin CTB 001, “Bad Debts”, which explains how to calculate and claim tax or security adjustments/refunds on bad debt write-offs for all consumer taxes including carbon tax, motor fuel tax, PST and tobacco tax.
Bulletin PST 136, “Concrete”
This bulletin contains comprehensive information relating to ready-mixed and precast concrete, both of which are taxable for PST purposes. For ready-mixed concrete, the tax is based on the total purchase price, including charges for items such as environmental levies and delivery. If the purchase of this type of concrete is bundled with non-taxable charges, PST will apply only on the fair market value of the taxable portion. For precast concrete, the purchase price is the total amount paid to purchase the product and this can include pumping charges where pumping is required to get concrete into a form.
Real property contractors must pay the PST on any goods obtained for the purposes of fulfilling a contract. They do not charge their customers PST on these contracts to improve real property. Any goods sold without services to install/affix are subject to PST, unless a specific exemption applies.
Mixer drums found on a cement mixer qualify for the production machinery and equipment (“PM&E”) exemption, however, related equipment such as automotive units, pump units and parts/materials or services to them do not qualify for exemption.
Bulletin PST 313, “Administrative Materials”
PST information on the all types of administrative material is covered in detail in this bulletin. The tax status of these materials is dependent on where they are purchased and where the use occurs.
Materials delivered within BC are taxable for PST purposes. If a portion of the materials are shipped outside of BC, a proportionate refund of PST may be claimed. Any materials shipped out of BC directly by third parties are exempt from PST.
Materials, including promotional materials, produced outside of BC and shipped into the province are also subject to PST.
The Ministry of Finance may allow eligible businesses to make purchases exempt of PST at the point of sale if they enter into a voluntary tax payment agreement (“TPA”). These businesses will then be required to self-assess and remit the PST on items used for a taxable purpose. Further details on these arrangements are outlined in Bulletin PST 317 (see below).
Bulletin PST 317, “Tax Payment Agreements”
In order to qualify for a voluntary TPAs, businesses must meet the following requirements:
- conducted business in BC for at least three years;
- have a good PST compliance record over the past three years;
- maintain a suitable accounting system; and
- have an active PST number.
Businesses, other than those which provide specific interprovincial/international rail transportation services, must also:
- qualify for the PM&E exemption and/or regularly acquire goods in BC for use outside the province; and
- have average annual acquisitions and/or leases for the last three calendar years that meet specific minimum requirements regarding exempt PM&E purchases or goods stored in inventory for later use within or outside BC.
Once an application is received and approved, the ministry will assign the business a TPA number. This TPA number must be provided to suppliers in order to be exempt from PST on qualifying purchases. Penalties and interest may apply if the registrant does not self-assess the PST when due (i.e., items are used for a taxable purpose or 12 months after the items acquisition).
Bulletin CTB 001, “Bad Debts”
When credit is extended to a customer and where no payment is received and the entire amount is being written off, a refund or adjustment for the full amount of tax collected and remitted can be claimed. Alternatively, if partial payment is received, a proportional amount of tax may be claimed as a refund or adjustment.
Generally a bad debt refund will be granted where an adjustment is made by a business on its PST return, however, a business not required to file a return can claim a refund with the ministry in order to obtain the adjustment.
This bulletin contains several useful examples to illustrate how the refund/adjustment would be calculated, and it also lists the process and supporting documentation required in order to make a claim.
Where a payment on a bad debt account is received after a refund/adjustment has been claimed, tax must be remitted based on the proportional amount of the recovery received.