BC Provincial Sales Tax for Online Sales to British Columbia Buyers

Canadian indirect tax primer

Canadian sales tax regimes are rapidly changing, being modernized to reflect the world we live in, a world where online sales continue to grow rapidly in Canada and globally. For years, plenty of online transactions have “escaped” sales taxation, particularly with sellers who do not have offices or places of business in a particular province in Canada that they sell to, because they reside in a different province or outside of Canada. 

Provincial sales tax (“PST”) provinces such as British Columbia, Saskatchewan and Manitoba, along with Quebec’s value-added tax (“QST”), have broadened their sales tax bases by taxing more services and intangible property (e.g. streaming, gaming, etc.) or they have tightened the requirements to register in their province to collect PST and QST and report/remit it to the province.

For all the other provinces and territories, any seller that is not a small that is or is required to be registered for GST, is automatically registered for harmonized sales tax (“HST”). HST is effectively the same tax base of products and services and has mostly the same rules as GST, but simply at a higher rate. Ontario’s HST rate is 13%, while all the provinces east of Quebec are at 15% HST. All the other provinces and territories have GST at 5%, along with their respective PST or QST in the case of Quebec.

What do British Columbia’s latest PST registration rules look like for my business?

British Columbia recently tightened their rules, requiring Canadian companies outside British Columbia, as well as non-residents of Canada, to register and charge, report, and remit PST. These changes were introduced in British Columbia’s February 2020 and 2021 provincial budgets with some changes taking effect on July 1, 2020 and the rest on April 1, 2021. In addition to introducing registration requirements for online marketplace facilitators and platforms, British Columbia also introduced more stringent rules for sellers that are located outside British Columbia but selling into that province.

For business selling goods and located outside British Columbia

Effective July 1, 2020, businesses located outside British Columbia must register, charge, report and remit PST on taxable goods, if they do ALL of the following:

1. Sell taxable goods to customers in British Columbia, including online sales;
2. Accept orders from customers located in British Columbia (including by telephone, mail, email or Internet) to purchase goods; and,
3. Hold the goods you sell to your British Columbia customers in inventory in British Columbia at the time of sale (e.g. you use a British Columbia fulfilment warehouse).

For business selling goods and located outside British Columbia

Effective July 1, 2020, businesses located outside British Columbia must register, charge, report and remit PST on taxable goods, if they do ALL of the following:

1. Sell taxable goods to customers in British Columbia, including online sales;
2. Accept orders from customers located in British Columbia (including by telephone, mail, email or Internet) to purchase goods; and,
3. Hold the goods you sell to your British Columbia customers in inventory in British Columbia at the time of sale (e.g. you use a British Columbia fulfilment warehouse).

For Canadian businesses located outside British Columbia selling goods

Effective April 1, 2021, British Columbia further tightened the rule above for businesses located outside British Columbia, but within Canada. Those businesses must register, charge, report and remit PST on taxable goods, if they do ALL of the following:

1. Sell taxable goods to customers in British Columbia;
2. Accept orders from customers located in British Columbia (including by telephone, mail, email or Internet) to purchase taxable goods;
3. Deliver the goods you sell to your British Columbia customers to locations in British Columbia (this includes goods you deliver through a third party, such as a courier); and,

Either

1. have gross revenue in the previous 12 months from all retail sales and leases (excludes resales) of goods and all sales of software and telecommunication services to British Columbia customers is more than $10,000; or,
2. their estimated gross revenue in the next 12 months from all retail sales and leases of goods and all sales of software and telecommunication services to British Columbia customers, is more than $10,00.

For all businesses located outside British Columbia

Also, effective April 1, 2021, businesses located outside British Columbia, and within or outside Canada, must register, charge, report and remit PST, if they meet ALL of the following conditions and surpass the taxable sales registration threshold (defined further below):

1. sell or provide taxable software for use on or with an electronic device ordinarily situated in B.C. or sell or provide taxable telecommunication services to customers in British Columbia,
2. accept orders from customers located in B.C. (including by telephone, mail, email or Internet) to purchase software for use on or with an electronic device ordinarily situated in British Columbia or telecommunication services, and
3. your business exceeds the taxable British Columbia sales threshold for registration (as outlined below) for residents and non-residents of Canada.

If your business is located in Canada, you will be required to register if either

1. your gross revenue in the previous 12 months from all retail sales and leases of goods and all sales and provisions of software and telecommunication services to British Columbia customers is more than $10,000; or,
2. your estimated gross revenue in the next 12 months from all retail sales and leases of goods and all sales and provisions of software and telecommunication services to British Columbia customers is more than $10,000.

If you are located outside Canada and meet the first two conditions above, then you will be required to register if either:

1. your gross revenue in the previous 12 months from all sales and provisions of software and telecommunication services to British Columbia customers is more than $10,000; or,
2. your estimated gross revenue in the next 12 months from all sales and provisions of software and telecommunication services to British Columbia customers is more than $10,.

Once registered under either scenario, such businesses must charge, report and remit British Columbia PST, on sales of all taxable goods, services, software and telecommunications services to British Columbia business and individual customers.

What’s included in “software” and “telecommunication services”?

Importantly, software or telecommunication services encompass most digital goods and services and if something isn’t characterized as software under British Columbia’s PST, it is most likely a telecommunication service. British Columbia’s PST information bulletins provide various examples of taxable software include the following, in addition to typical software purchased over the internet or in “hard copy”: subscriptions to a website to play an online video game; access to photo or video editing website to create, modify, or edit image or video files; and access to a website to complete your income tax return, etc.

Examples of telecommunication services include, among other digital services: phone (mobile or landline), fax, TV, radio (including satellite radio), internet access, email, text, picture and video messaging services, certain audio books, music, ringtones (includes text tones and other alert tones), audio programs (e.g. podcasts and radio programs), TV programs, movies and other videos and streaming services.

Our takeaways and next steps for you

British Columbia’s PST registration rules are second in complexity to the GST/HST and QST rules for non-residents. If you’re selling to British Columbia customers from anywhere within Canada (or outside Canada), you will need to see if these recent rule changes affect your business and monitor your sales thresholds to British Columbia customers.

Saskatchewan and Manitoba’s recent PST rule changes for registration are more straightforward and readily apply to most non-resident sellers whether they are in or outside Canada. You can read more about those provinces’ sales tax registration rules for online sellers in our article here. You can also read more about Quebec’s sales tax rules for online sellers and the GST/HST vs QST place of supply in our article here.

Not so complicated right? At Achen Henderson, we can help you to take the complexity out of sales taxes and we want to learn about your business, or your client’s business and tax challenges. Call us today for help getting your sales tax collection and reporting right, so that you can rest easy by ensuring your business is not offside with these rules across Canada or around the world.

Reach out to me directly for a free initial consult to determine if you have properly addressed these risks by clicking here.