On March 22, 2017, Minister of Finance Kevin Doherty presented the 2017 Saskatchewan budget, entitled “Meeting the Challenge”. The Minister noted that the province’s resource revenue has declined by more than $1 billion over the past three years due to continually low oil and potash prices, resulting in a budget deficit. The province plans to return to a balanced budget in three years, in an effort to keep government programs and services reasonable and sustainable. However, in order to meet this challenge, Saskatchewan announced that it will have to control and reduce spending, while at the same time modernizing and expanding its tax base.
This budget proposes to expand the provincial tax system by moving away from income taxes and placing more emphasis on consumption taxes – a change which is expected to promote productivity and growth and help keep the provincial economy strong. As a result, this year’s budget contains a number of significant commodity tax changes, which are explained below.
Provincial Sales Tax Rate Increase
The Saskatchewan Provincial Sales Tax (“PST”) rate will increase from 5% to 6%, effective March 23, 2017.
The new 6% PST rate applies to all taxable sales of goods, or lease payments that are made or become payable, on or after March 23, 2017. In addition, the new rate will apply to payments for taxable services that are made or become payable on or after March 23, 2017. However, where a service has been fully completed by March 22, 2017, it will continue to be taxed at the prior rate of 5%, even where billed on or after March 23, 2017. Special transitional rules will apply to prepaid service contracts, telecommunication services, electricity, and refunds and credits.
More detailed transitional rules for this PST rate increase are outlined in the following document:
SK - PST Rate Transition Rules
Provincial Sales Tax Base Expansion
In addition to the PST rate increase, the province introduced a number of measures aimed at expanding the PST base, as summarized below.
Insurance Premiums
PST at 6% will apply to all insurance, as defined under The Saskatchewan Insurance Act and including insurance for vehicles registered under The Automobile Accident Insurance Act, for residents of Saskatchewan and property located in the province, effective July 1, 2017. This change will apply to insurance contracts or premiums sold by an agency, company or group, as well as similar products sold by organizations which are not governed by The Saskatchewan Insurance Act. Note that the PST will apply to all premiums due on or after July 1, 2017, regardless of when the policy is issued.
Specifically, PST will apply to all life, accident and health insurance, all property insurance, including vehicles, liability and casualty premiums, and all agricultural insurance. However, reinsurance, self-insurance, annuity contracts, and contributions or premiums paid under the Canada Pension Plan, Employment Insurance Act (Canada) and The Workers Compensation Act, 2013, as well as certain insurance contracts purchased by status Indians or Indian bands will be exempt.
The Ministry of Finance anticipates the release of an Information Bulletin regarding the application of PST to insurance premiums by the end of April 2017.
Children’s Clothing
The PST exemption that applied to children’s clothing and footwear will be eliminated, effective April 1, 2017. Currently, clothing and footwear for children aged 17 and younger is generally exempt from PST.
Snack Foods, Beverages and Restaurant Meals
Restaurant meals, snack foods and many beverages will become subject to PST as of April 1, 2017. The province has indicated that, once this change takes effect, PST will apply to food and beverages in Saskatchewan on the same basis as under the GST/HST system. As a result, it is likely that any interpretation issued by the Canada Revenue Agency on the tax status of a particular food item will apply equally to food and beverages sold and consumed in Saskatchewan. Currently, most food and beverages sold in the province are exempt from PST.
Trade-in Allowances on Vehicles
PST is currently calculated on vehicles after the value of any trade-in has been applied. Effective April 1, 2017, PST will be calculated on the full purchase price of new vehicles (or vehicles which were not previously taxed in the province) prior to any trade-in allowance for eligible light vehicles, including cars, sport utility vehicles, light vans and trucks.
Repair, Renovation and Improvement of Real Property
The province will require PST to be charged to the customer for any repairs, renovations or improvements to real property for contracts entered into on or after April 1, 2017. This represents a substantial departure from the province’s previous approach to real property contracts, as most services relating to real property are currently not subject to PST. In order to prevent tax from being paid twice in respect of these transactions, contractors will be able to acquire building materials to be used in fulfilling their contracts without paying PST. Due to this change, all businesses providing services to real property must register for PST, effective April 1, 2017.
Further information on the application of PST to services to real property can be found in the following Information Notice:
SK PST - Services to Real Property
Permanently Mounted Equipment
The province will also eliminate the PST exemption for qualified permanently mounted equipment used in the exploration and development of oil, gas and potash resources, effective April 1, 2017.
Provincial Sales Tax Registry
The province has introduced a “Provincial Sales Tax On-Line Registry” to facilitate taxpayer verification that a particular business has an active vendor’s licence or registered consumer number. Suppliers may use this registry to verify that a business holds a valid PST vendor licence before supplying goods or services exempt of tax as items for resale. This registry should prove to be very useful for suppliers, since the beginning digit of a PST number will no longer indicate whether a business is registered as a vendor or consumer, effective April 1, 2017.
The online registry is available at the following link: http://www.skpstregistry.gov.sk.ca/
Fuel Tax
Effective April 1, 2017, several fuel tax exemptions and rebates will be eliminated or modified, as follows:
- the partial exemption for farm-use gasoline purchases previously provided under the “Permit Use Gasoline” program will be eliminated;
- the Aviation Fuel Tax Rebate for international flights departing Saskatchewan will be eliminated; and
- the exemption for bulk purchases of marked diesel fuel will be reduced to 80% of the purchase for holders of a valid Fuel Tax Exemption Permit.
Tobacco Tax
The tax rate on tobacco products will increase from 25 cents to 27 cents per cigarette, tobacco stick, smokeless tobacco and other tobacco products, effective March 23, 2017. In addition, the tax rate per carton of cigarettes will increase from $50 per carton to $54 per carton. An inventory declaration should be completed and returned with the remittance by April 20, 2017.
Liquor Mark-Ups
Effective April 1, 2017, wholesale liquor mark-up rates will generally increase as follows: 6.8% for beer products; 6% for coolers; 5.3% for wines; and 4% for spirits.
More Information
Additional information on the 2017 Saskatchewan budget is available on the province’s website at:
If you have any questions about how these proposed or impending PST changes might impact your organization, please do not hesitate to call the Ryan TaxDirectTM line at 1-800-667-1600.