Saskatchewan and Manitoba recently tightened their rules, requiring companies outside SK and MB, including non-residents of Canada, who sell into Saskatchewan and Manitoba, to register and charge, report, and remit SK & MB PST.
Does your business sell its products or services online to Canadian customers? If so, have considered your sales tax obligations across the country? Even for seasoned professionals, calculating sales tax based on where your customers are, can be difficult, and it is made even more difficult when your customers buy from you online.
If your business sells products or services online to customers in Canada, chances are you have to correctly calculate, charge indirect (sales) taxes in the form of GST, HST, and/or PST and remit it to various provincial and federal authorities.
I’m David Crawford, the Indirect Tax Leader at Achen Henderson CPAs, and I’ve designed this series of articles to teach you how sales tax applies to online sellers. In our first article of this series, we covered your business’ sales tax obligations in British Columbia for sales of products or services to BC customers. In this article, we will cover the other two PST provinces of Saskatchewan and Manitoba.
Canadian indirect taxes 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 BC, 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 supplier 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 Saskatchewan’s latest PST registration rules look like for my business?
The province began tightening its PST registration requirements in 2017 and took aim at real property contractors in order to greatly expand its provincial tax base. Prior to this change, non-residents of the province had to have a significant physical presence before Saskatchewan Finance would require the business to register and collect PST. Starting on or after April 1, 2017, PST registration was required for any business that met ALL of the following criteria:
- sells or leases taxable goods to a Saskatchewan customer as a final (excludes resales) for use or consumption in the province;
- sells or leases taxable services to a to a Saskatchewan customer as a final (excludes resales) for use or consumption in the province; or
- sells or provides for no charge, taxable goods to a person in Saskatchewan for general use or consumption as a promotional distribution.
This change captures any seller that does not otherwise carry-on business in Saskatchewan, if they sell taxable goods or services that are used or consumed in Saskatchewan. In other words, these changes capture a very broad set of online sellers and non-residents of the province, by requiring them to register for and collect, report and remit PST on sales of taxable goods, services and contracts of insurance.
In its 2021 provincial budget, Saskatchewan Finance introduced rules retroactive to January 1, 2021, targeting marketplace and platform sellers of taxable goods, services (including software) and online accommodations platforms. This further expanded the PST base and total sales tax intake, due to perceived and/or actual PST not being properly collected. I discuss sales taxes in general, for marketplace sellers and similar platforms in this
In addition to continually expanding its PST base of taxable services over the years, Saskatchewan has long held that many types of software, most services provided in respect of software, access to software by any means and several types of telecommunications were considered to be taxable. We get into explaining these further below.
Saskatchewan PST on software
For software-related services, PST applies to the electronic storage of information or the right to access, search or use electronically stored information. It also applies to any charges for the input, processing, transformation or other manipulation of data by a computer. Training and support services are also subject to PST if they are provided in relation to software, computer equipment, a computer system or a network of computers, including telephone support.
Other “quasi-software” taxable services include services provided by an internet services provider, such as internet access, email, texting, RSS feeds, web hosting and storage services. Designers and hosting providers are caught if they provide website preparation, design or development services, website maintenance services, website content management, website statistics capture and summarization, testing services, macromedia flash design services, website animation, graphic design services or web hosting services. In some cases, certain consulting, management or on-site supervision services are also caught.
Saskatchewan PST on telecommunication services
When it comes to Saskatchewan’s long-standing views on telecommunication services, PST applies to what you would consider typical services involving telecommunications systems such as phone and internet, etc. However, PST also applies on certain alarm monitoring services, including medical alert monitoring, paging and other electronic messaging services, cable TV and “pay per view” subscriptions and satellite transmission services.
What do Manitoba’s latest PST registration rules look like for my business?
For Manitoba, PST registration requirements were stable for many years leading up to the major changes in 2015, 2016, and finally in 2021. The latest changes in 2021 capture marketplace and platform sellers of taxable goods, services and online accommodations platforms. As it stands, any seller (including those that don’t carry on business in Manitoba) that makes taxable sales of goods to Manitoba customers for use or consumption in Manitoba and meets ALL of the following criteria, is required to be registered to collect, report and remit PST:
- the seller causes the goods to be delivered in Manitoba,
- the seller, directly or through an agent, solicits orders for goods from Manitoba customers by advertising or by any other means, and
- the seller accepts orders to purchase goods and the order originates in Manitoba; or
If the non-resident seller does not meet the above three criteria, but they hold inventory in Manitoba at any time will require the seller to register and collect, report and remit PST, provided the goods are sold and shipped to a Manitoba customer.
Manitoba PST on streaming services
Like Saskatchewan’s continual expansion of its PST base, Manitoba has followed suit over the years to apply PST to more and more services. Effective December 2021, Manitoba began taxing several digital products and services such as streaming services and similar telecommunications. Manitoba considers a streaming service to include a subscription that provides the right, whether exercised or not, to download, view or access, by means of an electronic device, one or more of the following telecommunications:
Music, audio program (including podcasts or radio broadcasts but excluding audiobooks), TV programs, movies or other video, along with ring tones (including text tones and other alert tones) sold to purchasers that are ordinarily resident in Manitoba. Like Saskatchewan, certain audio or video programs (including recordings) that meet an “educational” threshold, may be exempt from PST.
Our takeaways and next steps for you
These two provinces’ recent PST registration rule changes are more straightforward than British Columbia’s and readily apply to most non-resident sellers whether they are in or outside Canada. In other words, it is very easy to fall into the requirement to register for Saskatchewan and Manitoba PST if your business sells taxable goods, services and many digital products to customers in these provinces.
You can read more about British Columbia’s PST 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. We are excited 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.Get SK & MB PST Help Today!