Businesses facilitating the sale or lease of certain goods, services, or software in British Columbia through online platforms are reminded that new Provincial Sales Tax (PST) obligations take effect on July 1, 2022.
As announced in British Columbia Budget 2022, marketplace facilitators are required to collect and remit PST on all supplies of taxable goods shipped from within Canada for delivery in British Columbia. The new requirements also apply to most supplies of taxable services, accommodations, and software in British Columbia. In addition, certain services provided by marketplace facilitators to sellers are now subject to PST.
A “marketplace facilitator” is broadly defined as a person who operates, owns, or controls an online marketplace, facilitates retail sales of goods, taxable services, or software through the online platform, and collects payment in respect of such sales. As a result, many online businesses without a physical presence in British Columbia, including online retailers, digital streaming services, and short-term rental platform operators, are subject to the new requirements.
Effective July 1, 2022, marketplace facilitators must register for, and collect and remit, PST if they facilitate the retail sale of any of the following by a marketplace seller:
- Goods located in Canada at the time of sale and sold to a person in British Columbia;
- Taxable services (other than legal services or accommodations) provided to a person in British Columbia;
- Accommodations provided in British Columbia; or
- Software for use on or with an electronic device ordinarily situated in British Columbia.
There is an exception to the registration requirements for marketplace facilitators where the gross value of retail sales made through their platforms is no more than $10,000 in the preceding 12 months (or is estimated to be below that threshold for the next 12 months).
Online Marketplace Services Taxable
Effective July 1, 2022, online marketplace services are subject to PST, requiring marketplace facilitators to collect tax on many services provided to sellers.
A taxable online marketplace service is broadly defined and includes any of the following when provided by a marketplace facilitator (or its agent, partner, or associated corporation) to a marketplace seller:
- Listing services;
- Advertising or promotion;
- Ordering, booking, or fulfillment services;
- Payment collection or facilitation;
- Cancellation, change, return, or exchange processing services;
- Customer service; and
- Other services provided to facilitate sales through an online platform.
PST is required to be collected (and paid by the purchaser) when an online marketplace service is either provided in British Columbia or in respect of accommodation in the province or provided to a person in British Columbia and relates to a sale of goods, taxable services, or software for use or consumption in the province.
A positive development for marketplace sellers is that, as of July 1, 2022, they are no longer required to collect and remit PST on taxable supplies made through marketplace facilitators. Note that marketplace sellers remain jointly and severally liable for any PST not collected and remitted, as required, by a marketplace facilitator.
The province has indicated that it is looking to expand these marketplace facilitator obligations in the future to include sales of goods shipped from outside Canada to consumers in British Columbia.
Further details on British Columbia’s new PST rules for marketplace facilitators may be found in Information Bulletin PST 142, Marketplace Facilitators, Marketplace Sellers and Online Marketplace Services.
If you have any questions about how these rules might impact your organization, please do not hesitate to contact the Ryan TaxDirect® line at email@example.com or 1.800.667.1600.