Return to BC PST

Return to BC PST

Larry GuthrieSabina Diaconescu

March 2013

PST

Agenda

• Introduction and overview

• General rules

• Transitional rules

• Exemptions relevant to SFU

• Supplies by ancillary departments & others making external sales

• Other impacts to SFU

• PST impacts on cost

2 Return to BC PST - March 2013

Introduction and overview


BC sales tax de-harmonization: What is it?

• On April 1, 2013, BC replaces the 12% HST with the 5% GST and 7% PST

• Replacement of one tax system for two tax systems

‒ HST = All federal

‒ GST + PST = Federal + Provincial

• SFU is registered for HST purposes and is considered to be registered for GST purposes. SFU’s GST number is 11852 0725 RT0001

• SFU is already registered for PST. SFU’s PST number is PST-1000-6004


Transition from HST to GST

Before April 1, 2013 On and after April 1, 2013

GST/HST rate 12% HST(5% CVAT + 7% PVAT)

5% GST

General rules and tax base

The HST and GST are both administered at the federal level by the CRA. The same general rules and tax base applies for both GST and HST. The same CRA account is used for both GST and HST. The place of supply rules are the same

Point of sale rebates

Point of sale rebates available on 7% PVAT for specific goods

No more point of sale rebates, as there is no PVAT portion

Public sector body rebates

• Rebate for universities− 67% on CVAT− 75% on PVAT− Total rebate = 71.67%

• Rebate for universities− 67% on 5% GST

Imports Pay CVAT at the border, and self-assess PVAT

Pay GST at the border(Self-assess PST when required)


AlbertaGST 5%

BritishColumbiaGST 5%

PST 7%(1)

YukonTerritoryGST 5% Northwest

TerritoriesGST 5%

Newfoundland& LabradorHST 13%

OntarioHST 13%

ManitobaGST 5%

PST 7% (1)Saskatch-ewan

GST 5%PST 5% (1)

NunavutGST 5%

PrinceEdward Island

HST 14%

Nova Scotia(3)

HST 15%

QuébecGST 5%

QST 9.975% (2)

Overview of Canadian sales taxes after April 1, 2013

New Brunswick

HST 13%1) PST applicable on the consideration before GST2) QST applicable on the consideration before GST3) Nova Scotia announced in its 2012 Budget that it will reduce the HST by 1% on

July 1, 2014 and by another 1% on July 1, 2015

Return to BC PST - March 20136

General rules


BC PST: Basics

• On April 1, 2013, vendors will start to charge BC PST on their supplies of taxable goods and services

• The BC PST is governed under the PSTA and the regulations

• PST is a "use tax", designed to be paid by the end-user of the product or service

‒ There is no input credit or rebate mechanisms like the GST

‒ PST is an absolute cost to an organization

• Tax base is province-specific, not national


BC PST: Recap on PST tax rates

Tax RateBC PST on taxable goods and services 7%

Innovative Clean Energy fund on energy products

0.4%

BC PST on accommodation 8% + 2% in designated accommodation areas

Liquor tax 10%

Passenger vehicle rentals $1.50 per day

Private vehicle sales 12%

Luxury passenger vehicles 8% to 10%


BC PST: Key concepts

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PST

Services

• Applies to some services, mainly those related to TPP

Real property

• Does not apply to Real Property but, rather, to embedded materials

Tangible personal property (TPP)

• Applies to most TPP, subject to some exemptions

BC PST: Key concepts

TPP

• Goods that you can see, feel, weigh, measure, and touch

• Includes natural or manufactured gas, heat, electricity, and affixed machinery

• Taxable, unless specifically exempt

Real property

• Land and items permanently attached to the land (building and structures)

• Includes improvements to real property

• Generally not taxable

Services

• Generally not taxable

• Taxable services: telecommunication, legal, short-term accommodation, and related services

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BC PST: Summary of how tax applies

GeneralAlcoholic beverages

Transient accommodation

PST rate 7% 10%8% + up to 2% in certain areas

General tax base

• Most TPP• Labour to install, assemble, adjust,

maintain, or repair TPP• Legal services• Telecommunication services• Software

• Beverage alcohol sold in stores, bars, and/or restaurants

Examples of items not part of the base

• Real property transactions• Most professional services• Transportation services• Intangible property

Examples of exemptions

• TPP for resale• Raw materials/consumables used in

manufacturing and production• Certain publications• Residential electricity, gas, and diesel

fuel• Basic groceries• Children’s clothing• Feminine hygiene products• Prescription medicine

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Consumer goods and services

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Taxable items Non-taxable items

Short-term accommodation Basic groceriesComputers Snack foodsFurniture Basic cable televisionCleaning products LandscapingToys Long-term accommodationOutdoor play equipment Public transit faresStationery Taxi faresPets (including food) Air flightsJewellery Admission to eventsAlcoholic beverages MembershipsCell phones School coursesInternet access Prescription drugs and glassesBuilding materials Children’s clothingKitchen utensils and equipment Gasoline Vehicles (cars, trucks) BicyclesParking (21%) Accounting servicesTires Financial servicesShort-term lease of a vehicle InsuranceLegal services Cleaning servicesTelecommunication services Household moving services

BC PST: Self-assessment rules

When does SFU have to self-assess PST?

• If TPP is purchased from outside BC from vendors who are not registered to collect PST, there is a requirement to self-assess PST when the TPP is used in BC

• The self-assessment has to be done on the landed cost of the TPP

What is the landed cost?

• Costs and expenses for materials, labour, and other manufacturing and processing costs and expenses

• Costs and expenses for services, customs, excise, and transportation

Payment services self-assesses PST on imports of taxable goods and services including “landed costs” and a charge will be reflected in your accounts with respect to this

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BC PST: Self-assessment rules

On what do we self-assess PST?

• Purchases for own use

• Promotional distribution (e.g. gifts, marketing materials)

• TPP brought into the province

• Out of province purchases – PST on landed cost

‒ Goods brought in from another country

‒ Goods transferred between provinces

‒ Note: A refund of PST may be available from the originating jurisdiction, if goods were not used and, subsequently, were moved out of the province

• Taxable services

• Used personal goods are exempted

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Freight charges: Within and outside of BC

Within BC

• PST does not apply to transportation services not related to a sale or lease of good (e.g., skytrain and bus fares, moving furniture, etc.)

• If the transportation service is related to a sale or lease of goods, PST may apply. The PST treatment is based on where the title to the goods passes to the customer and the tax status of the product

1. Title to product passes at the purchaser’s location or at another location other than vendor’s premises. The freight charge will be included in the purchase price of the good. If the product itself is taxable, then PST must be charged on the entire transaction, including the freight charge. If the product is not taxable, no PST applies to the entire transaction

2. Title passes at the vendor’s location. The transportation charge will not form part of the purchase price and will be non-taxable, as long as it is shown as a separate charge

Outside BC

• You do not charge PST, if you ship goods outside of BC

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Related services

• Related services are services provided to TPP

• Generally, if a good is taxable, services provided to that good are taxable, unless a specific exemption applies

What is taxable?

• Services provided to TPP, such as repair, maintenance, installation, restoration, reconditioning, set-up, dismantling, and protective treatment services

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BC PST: Rules on software

• The purchase of software by a business will be subject to PST, provided that the software is used in BC

• When the software is used both inside and outside of BC, the amount of PST will be calculated based on the BC-usage

What is exempt?

• Exemptions regarding the purchase of software from the previous PST legislation will be re-implemented, such as:

‒ Software purchased by SFU for use more than 90% of the time as a teaching aid for students

‒ Software purchased for resale

‒ Custom and custom-modified software

‒ Services provided to software: installation, modification, etc.

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Transitional rules


Transitional rules: Goods and services purchased in Canada

Type of supplyInvoice is issued or dated before April 1, 2013

Invoice is issued or dated on or after April 1, 2013

Goods supplied by way of sale or lease (parts, equipment, machinery, computer hardware, etc.)

12% HST will generally apply

5% GST will generally apply

7% BC PST will generally apply on taxable purchases

Services to repair goods 12% HST will generally apply


7% BC PST will generally apply to repairs to taxable goods

Transportation services 12% HST will generally apply


Legal services



7% BC PST will generally apply

General services (consulting services, installation of software, personal services, etc.)




Transitional rules: Goods brought into BC from outside Canada

By foreign vendors (i.e., outside of Canada)

• PST applies if:

‒ Goods brought, sent, or delivered into BC from outside Canada on or after April 1, 2013

‒ Delivery date is key

By BC resident

• PST applies if:

‒ Goods brought or sent into BC on or after April 1, 2013

‒ Entry date is key


Transitional rules: Software

• PST applies to:

‒ Software used on or with electronic devices ordinarily situated in BC• When the consideration becomes due on or after April 1, 2013, and

• Is not paid before April 1, 2013

‒ Consideration is generally due at the earlier of when an invoice is issued or dated. When there is an agreement in place, consideration is due on the day the recipient of the supply is required to pay the consideration, pursuant to the written agreement


Exemptions relevant to SFU


Exemptions: School supplies purchased by SFU

Examples of goods that are exempt of PST if purchased by SFU for use by students or for use in instructing students:

• Cellulose tape

• Chalk

• Charts, diagrams, and maps

• Lesson notes, précis, examinations, test papers, answer keys, work sheets, and other similar materials and materials to manufacture those materials

• Pens and markers for use on whiteboards

• Software for use on a computer, as a teaching aid for students

• Supplies and materials obtained for consumption in a science course

SFU intranet: complete list included in the PST section of the finance website

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Exemptions: School supplies purchased by students

Exempt goods when purchased for use by students (exhaustive list):

• Bags designed to carry books and supplies (excluding backpacks, bags with wheels, briefcases, knapsacks, sport bags, tote bags, or attaché cases)

• Drawing instruments

• Erasers, glue, ink, rulers

• Lined, unlined, drawing, graph, and music manuscript paper

• Paints and paint brushes

• Pencils and wax crayons

• Pens, other than fountain pens and nibs

• Ring binders

• School art portfolios

• Work books

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Exemptions: Publications

The following publications are exempt of PST:

• Books that contain no advertising and that are published solely for educational, technical, cultural, or literary purposes

• An employee newsletter

• Student yearbooks

• Sheet music

• Magazines or periodicals containing at least 10% technical, literary, editorial, and pictorial content

• Newspapers, if at least 20% of the content includes editorials, news, and articles of local or common interest

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Exemptions: General

The following are examples of goods/services not subject to PST:

• Courses

• Administration fees and application fees

• Admissions (e.g., seminars, conferences, and athletic events)

• Memberships

• Transportation services (e.g., travel by plane or by bus, courier, and freight)

• Examination fees

• Fines (e.g., library and parking)

• License fees

• Tutoring

• Inter-library loan services

SFU intranet: a detailed list of taxable and non-taxable goods and services will be posted

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Exemptions: Safety equipment

• Certain work-related safety equipment and protective clothing designed to be worn by, or attached to, a worker is exempt of PST (e.g., safety glasses, respirators, hearing protectors, certain gloves, and helmets)

• Must be purchased:

‒ By an employer for use by their employees in the course of employment

‒ By the university

• Supporting documentation is required

‒ SFU must provide its PST number at the moment of purchase

• There is also some safety equipment that is exempt of PST, independent of whether or not it is for a worker (e.g., first aid kits, life jackets, portable fire extinguishers, etc.)

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Exemptions: Prototypes

Qualifying prototypes

• The first full-scale functional form of a new product, and

• The result of research and development activities aimed at developing a new or improved product or a new or improved process

Purchases

• What is not taxable?

‒ Materials attached to, processed, fabricated, manufactured, or incorporated into a prototype

‒ Prototypes used in demonstration or display or for testing in R&D

‒ Software that is specifically designed for a prototype

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Supplies by ancillary departments & others making external sales


Changes to systems

• The return to PST requires changes to the following systems and processes:

‒ Modify point of sale system to account for PST, effective April 1

‒ Invoices have to include breakdown of PST and GST

‒ Ensure that the PST is charged on taxable goods and services

‒ Ensure that, at the moment of returning or exchanging goods, the correct tax is credited

‒ Include SFU’s PST number on purchase orders for goods that will be purchased for re-sale. The PST number for SFU is PST-1000-6004

It is each departments’ responsibility to ensure that the correct taxes are collected at the point of sale

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Goods purchased for resale or lease (or goods to be incorporated into goods for resale)

• No PST should be paid to vendors when SFU purchases goods that are going to be sold or leased to external parties

Supporting documentation is required

• SFU must provide the PST number to the vendor when ordering the goods

• The vendor will record the PST number on the invoice

• In the case of written agreement, the vendor has the alternative of recording SFU’s PST number on the contract

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Bookstore

PST will apply to goods sold by the bookstore with the exception of the following:

• Books, qualifying magazines and periodicals, qualifying newspapers

• Children-sized clothing

• Adult-sized clothing sold for children under the age of 15, when a certificate is signed

• School supplies included in the PST regulations

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Athletics and recreation

Supplies subject to PST

• Merchandise (fitness, aquatic, events, etc.)

• Rental of equipment

Supplies exempt / not subject to PST

• Memberships (e.g., gym and sports teams)

• Camps

• Facility rentals

• Admissions (e.g., games or other sport events)

• Lessons (e.g., swimming and fitness)

• Children-sized clothing or adult-sized clothing sold for children, with provision of a signed certificate

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Meeting events and conference centre (MECS)


• Equipment rentals

• Supplies of telecommunication services

• Rentals of furniture and other goods

• Alcoholic beverages (10% PST)


• Registration fees for events

• Space rental

• Food and non-alcoholic beverages

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Residence and housing


• Short-term accommodation (8% PST + 2% municipal tax)

• Internet access

• Rental of equipment


• Long-term accommodation (more than one month)

• Meals

• Laundry services

• Residential telephone services

• Hall rentals

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Document solutions

Examples of supplies subject to PST (sales to external parties)

• Brochures

• Handouts

• Business cards

• Banners and posters

Examples of supplies exempt / not subject to PST

• Books for educational, technical, cultural, or literary purposes

• Examinations printed for schools

• Laundry services

• Student year-books

• Sales of goods for resale (obtain PST number of purchaser)

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Parking

• The BC PST will not apply on parking

• The 21% parking tax that is currently in place will continue to apply on or after April 1, 2013

• The GST applies on top of the base cost and the 21% parking tax

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Internal charges

• The PST and GST may apply to some internal charges, depending on the supplies and the department making the supplies

• Additional information on this will be posted in the finance website

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General Ledger accounts for sales

• The following are the GL accounts that you need to use to record the GST/HST and PST collected on your sales.

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Beneficiary delivery address in: GST/HST rate GST/HST Code GL code descriptionBC 5% 11-99999-1265 GST 5% Payable on SalesAB 5% 11-99999-1265 GST 5% Payable on SalesSaskatchewan 5% 11-99999-1265 GST 5% Payable on SalesManitoba 5% 11-99999-1265 GST 5% Payable on SalesOntario 13% 11-99999-2160 HST 13% Payable PPQuebec 5% 11-99999-1265 GST 5% Payable on SalesNova Scotia 15% 11-99999-2161 HST NS (15%) Payable PPNew Brunswick 13% 11-99999-2160 HST 13% Payable PPNewfoundland 13% 11-99999-2160 HST 13% Payable PPPrince Edward Island 14% 11-99999-2159 HST PEI (14%) Payable PPNortwest Territories, Yukon, & Nunavut 5% 11-99999-1265 GST 5% Payable on SalesOut-of-country 5% n/a n/a

Province where sale is made: PST rate GL Code GL code description BC 7% 11-99999-2151 BC PST payable

Other impacts to SFU


System changes

• The following changes have to be made to the systems and processes:

‒ Changes in PeopleSoft to formulas that calculate the GST rebates

‒ Changes to SIMS

‒ Activate PST general ledger account

‒ Update template used for P-cards

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Employee expense claims and P-Cards

• Impact on expense reports is as follows:

‒ Users have to make sure that the correct codes are selected for expense type and the jurisdiction where the expense was incurred

‒ All of the work related to the re-implementation of PST has been done behind the scenes by SFU’s IT analysts

• PCard transactions

‒ Please remember to reconcile all your tax applicable receipts and to fill out the BMO details online description field with a meaningful purchase description to ensure correct tax rebate application

‒ Interprovincial purchases: please separate HST/GST or PST rates on all your reconciliation purchases

‒ Out-of-country purchases: Payment Services is GST/PST self-assessing all related transactions, based on purchase description

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Real property (land and building)

• For the purposes of the PST, supplying and installing goods under a contract to improve real property is not a sale of those goods to the customer; therefore, the exemption for goods acquired for resale is not applicable

• PST must be paid by the real property contractor, regardless of whether the contract is a time and materials contract or a lump sum contract, unless a specific exemption applies


PST impacts on costs


Example: Purchase of PST taxable goods

• Increased cost due to PST: $5.25 (108.65-103.40)

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Before April 1, 2013 Amount CVAT BCVAT Total

Office furniture 100.00 5.00 7.00 112.00

less 67% CVAT Rebate (3.35) (3.35)

less 75% BCVAT Rebate (5.25) (5.25)

Net Cost 100.00 1.65 1.75 103.40

After April 1, 2013 Amount GST PST Total

Office furniture 100.00 5.00 7.00 112.00

less 67% GST Rebate (3.35) (3.35)

Net Cost 100.00 1.65 7.00 108.65

Example: Purchase of PST taxable services

• Increased cost due to PST: $5.25 (108.65-103.40)

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Repair of equipment 100.00 5.00 7.00 112.00



Net Cost 100.00 1.65 1.75 103.40


Repair of equipment 100.00 5.00 7.00 112.00

less 67% GST Rebate (3.35) (3.35)

Net Cost 100.00 1.65 7.00 108.65

Example: Purchase of PST exempt services

• Decreased in cost due to PST: $1.75 (103.40 – 101.65)

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Consulting services 100.00 5.00 7.00 112.00



Net Cost 100.00 1.65 1.75 103.40


Consulting services 100.00 5.00 - 105.00

less 67% GST Rebate (3.35) (3.35)

Net Cost 100.00 1.65 - 101.65

Top 5 things to remember on PST

1. Payment Services will do the PST self-assessment on imports of taxable goods and services

2. Each department is responsible for collecting the correct amount of GST and PST on sales and using the correct GL accounts to record the GST and PST collected

3. Present SFU’s PST number when claiming exemptions on purchases for resale or exemptions on goods purchased for educational purposes

4. More information on PST and GST is available in SFU’s finance website

5. The following will be the net costs due to GST and PST on a $100 purchase:

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Useful websites

Bulletins and publications:

• http://www2.gov.bc.ca/gov/topic.page?id=0CE539AD86F44033A1C531B9B597EA86

Frequently asked questions:

• http://www2.gov.bc.ca/gov/topic.page?id=CE70BF6CB8424CA9A38F1F6C33EE7E1D&title=Frequently%20Asked%20Questions

File path of SFU intranet:

• http://www.sfu.ca/finance.html

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http://www2.gov.bc.ca/gov/topic.page?id=0CE539AD86F44033A1C531B9B597EA86



http://www2.gov.bc.ca/gov/topic.page?id=CE70BF6CB8424CA9A38F1F6C33EE7E1D&title=Frequently%20Asked%20Questions



http://www.sfu.ca/finance.html

Contacts

Sabina Diaconescu

Senior Manager, Payment Services

778-782-7255

[email protected]

Larry Guthrie

Director, Financial Services

778-782-4708

[email protected]

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Questions?

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Return to BC PST

Documents

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