On February 17, 2015, Minister of Finance Michael de Jong announced British Columbia’s 2015 budget. “Balanced Budget 2015” suggests the previous fiscal year will have a surplus of $879 million, in comparison to the forecasted budget surplus of $184 million. Continuing that trend, this year’s budget forecasts surpluses for each of the next three years, totalling in excess of $1 billion, including an estimated surplus of $284 million for the upcoming year. Additionally, the Minister revealed that the province’s fiscal discipline allows it to balance the books, while making strategic investments in health care and education, stimulating growth in key economic sectors, and improving support for families and those who are less fortunate.
Included in this year's budget are several interesting tax changes which have been summarized below.
Provincial Sales Tax Measures
Goods Used in British Columbia to Improve Real Property outside British Columbia
The budget proposes to update the legislation to clarify that, effective February 18, 2015, goods brought, sent or delivered into British Columbia to be incorporated or attached to other tangible personal property (“TPP”) used to fulfill a contract relating to real property located outside of British Columbia will attract PST. However, a refund may be available where unrecoverable sales tax is paid on the resultant goods in the jurisdiction where the TPP is installed, or where TPP is shipped outside of British Columbia prior to any use in the province. Additional information on this clarification and situations in which a refund may be available can be found in British Columbia Bulletin PST 506, Real Property Situated Outside BC.
Registration Obligations Extended
This year’s budget has extended the conditions under which a non-resident of British Columbia is required to register to collect PST. Currently, registration is required where a Canadian non-resident of the province sells and delivers taxable goods to customers in British Columbia, accepts purchase orders from customers in British Columbia, and solicits persons in British Columbia for orders to purchase taxable goods.
Effective September 1, 2015, organizations that meet the first two conditions and hold TPP in inventory in British Columbia at the time the TPP is sold will also be required to register for PST. This new set of conditions potentially broadens the registration requirements to non-residents of Canada that have inventory located in the province.
Organizations have until September 1, 2015 to submit voluntary registrations based on these extended conditions; after that date, persons that do not register where required to do so may be subject to failure-to-register penalties.
Clarifications on Multi-jurisdictional Vehicle Tax
British Columbia is a member of the International Registration Plan (“IRP”), which is a multi-jurisdictional licensing agreement that establishes a uniform system for administering and collecting licence and other recurring fees and taxes from persons operating multi-jurisdictional vehicles (“MJVs”) for the commercial transportation of goods and passengers.
Carriers are typically required to include travel ratio distance information (or estimates) on the initial application for IRP registration and provide copies of the bill of sale or lease agreement for each vehicle. This year’s budget has clarified that, for new fleets licensed on or after January 1, 2015, tax on the MJVs will be calculated using a set travel ratio for each jurisdiction. The actual travel ratio will continue to be used for calculating tax on existing fleets. Previously, reasonable estimates were used for calculating tax on vehicles that were not MJVs for at least 90 days in the preceding calculation year.
British Columbia MJV tax is generally payable to the ICBC Prorate Office and includes all applicable fees and taxes for the jurisdictions in which a carrier operates.
Increase in Maximum Tax Rate for Municipal and Regional District Tax Program
The municipal and regional district tax (“MRDT”), which is used to fund local tourism marketing programs and projects, applies to sales of short-term accommodation provided in participating areas of British Columbia on behalf of municipalities, regional districts and other eligible entities. The 2015 budget has proposed to increase the maximum MRDT rate from 2% to 3%, but participants must apply to increase the rate in their area, and any rate increases will not become effective until after the application has been approved.
British Columbia Bulletin PST 120, Accommodation, contains more information and expands on the application of tax to customer stays that straddle changes in the MRDT participation status or rate. The customer is charged the applicable MRDT rate based on when payment is due, which is typically the last day of a stay. As a result, customers may be eligible for a refund if MRDT was paid in a newly designated accommodation area or the MRDT rate increased during their stay, where reservations were confirmed or a deposit was paid prior to the effective date of the change. Alternatively, if an area stops participating in the MRDT program during a customer’s stay, no MRDT is charged on the accommodations for the entire duration of the stay.
Exemption for Lift Chairs Sold on Prescription
Effective February 18, 2015, lift chairs, when sold on prescription and designed to help a person move from standing to sitting, sitting to standing, or both, are exempt from PST. This information has been added to British Columbia Bulletin PST 207, Medical Supplies and Equipment (see section entitled “Other Medical Products”).
Carbon Tax Measures
The government has reviewed the carbon tax and its impact on British Columbia residents. This review covered all aspects of provincial taxes, including the impact of personal income tax credit enhancements extended or proposed by this year’s budget.
As required under the Carbon Tax Act, the government reported that it achieved revenue-neutrality in respect of the carbon tax for 2013/2014. A revised revenue and tax reduction forecast indicated that personal and business tax revenue reduction measures exceeded the carbon tax collected by $10 million in 2013/2014. In addition, the revised forecast for 2014/2015 projects that personal and business tax reductions will exceed projected carbon tax revenue by $205 million. The government also confirmed that carbon tax rates will remain the same at $30 per tonne of carbon dioxide equivalent emissions.
Motor Fuel Tax Measures
British Columbia proposes to extend the due date for natural gas returns in respect of natural gas used in stationary internal combustion engines from the 15th day of the following month to the end of the following month.
Effective July 1, 2015, sellers of coloured fuel must charge the clear fuel tax rate to purchasers, unless they provide a completed certification form at or prior to the time of sale. The purchaser must certify that they will be using the coloured fuel only for specifically authorized purposes. Sellers will need to obtain a new certification form from new customers at or before the first time coloured fuel is sold. For existing customers, the new certification form will replace the current Coloured Fuel Account Certification form (FIN 438). The previous version of the form may be retained on file to support coloured fuel purchases by an existing customer, provided the information is current.
Purchasers of clear fuel who colour the fuel and sell it at the coloured fuel rate may not be eligible for a refund of the difference between the security paid when the fuel was acquired and the tax subsequently collected on the sale of the coloured fuel, unless they have obtained the required certification form. Purchasers that pay tax at the clear fuel rate may be eligible for a refund of the difference between the tax paid and the amount payable at the coloured fuel rate, if it can be demonstrated that the fuel was used for a specifically authorized purpose.
In addition, effective July 1, 2015, the budget proposes that the operation of a locomotive will be an authorized use of coloured fuel.
The province also proposes that, where coloured fuel is purchased for an unauthorized use, a penalty equal to the greater of three times the tax that would have been payable at the clear fuel rate and a flat amount, not exceeding $1,000, will apply.
Additional information can be found in the British Columbia Tax Notice 2015-001, Notice to Retail Dealers that Sell Coloured Fuel.
The government also announced its intention to further streamline the compliance burden on collectors, retail dealers and purchasers, for both carbon and motor fuel tax purposes, in relation to fuel imported by ship into British Columbia.
Tobacco Tax Measures
This year’s budget proposes that, effective February 18, 2015, wholesalers that receive delivery in British Columbia, or bring or send tobacco into British Columbia, for resale must pay security to the province. Prior to this clarification, security appeared to be required only when the wholesaler received delivery of tobacco in British Columbia. The security is determined as the amount of tobacco tax collectable on the subsequent retail sale of the tobacco, and this security is required to be paid to the Ministry by the 20th day of the month following the month during which the wholesaler brought or sent the tobacco into British Columbia, or received the tobacco in British Columbia. Additional information is available from Tax Bulletin TTA 004, Wholesale Dealers, Security Payments, Exemptions and Refunds.
Further information on British Columbia's 2015 budget may be found on the province's web site at: