Provincial Sales Tax information session

Real Property Contractors

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The Ministry of Finance provides outreach

services to assist British Columbians in

understanding and applying provincial tax

legislation.

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Interactive online webinars

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Ministry of Finance - Outreach

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Further information

Common mistakes

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Provincial sales tax (PST) is a retail sales tax that applies when a taxable good or service is purchased, acquired or brought into B.C., unless a specific exemption applies.

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PST – The Basics

Small Business Guide to PST

eTaxBC

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gov.bc.ca/etaxbc/myaccount

24/7 access to your tax account

Topics

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1) Real property and contractors

2) Who pays the PST

3) Supply and install situations

4) Real property outside of BC

5) Exemptions

Topic 1

Real property and contractors

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PST does not apply to services to real property.

Real Property

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Bulletin PST 501 – Real Property Contractors

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For the purpose of the PST, goods that are attached so that they become part of real property are either:

• improvements to real property

• affixed machinery

Improvements to Real Property

, or

Bulletin PST 503 – Affixed Machinery

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Improvements to Real Property

Each situation may be different as the rules are

based on common-law principles. There are two

scenarios to consider:

• General Rule

• Exception – attachment for the better use of the

good

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When a good becomes part of real property

Bulletin PST 501 – Real Property Contractors

Example

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Goods that become part of real property

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Goods that do not become part of real property

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Bulletin PST 502 – Examples - Goods That Generally Become Part of Real Property and Goods That Do Not

You are a contractor if you supply and affix, or install, goods that become part of real property.

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Contractors

Topic 2

Who pays the PST?

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You pay PST on taxable goods purchased to fulfil contracts to supply and install goods that will become part of real property. You are considered the end user of the goods.

If you only install goods that become part of real property, you do not need to be registered as a collector.

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How PST Applies to Contractors

Registering to collect PST when you don’t need to

You do not charge your customer PST.

You must pay PST regardless of the type of contract, unless a specific exemption applies.

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How PST Applies to Contractors

Charging your customer PST when you shouldn’t be

You pay the PST when the work you do or the goods you install become part of real property.

If your customer agrees, you may be able to transfer the PST liability to them.

Your customer does pay the PST when you sell them goods and you don’t do the installation.

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How PST Applies to Contractors

Not paying PST when you buy your goods and supplies

Example

Contractor purchases: Drywall - $1,000 PST - $70 Total paid - $1,070

Client invoiced: Supplies - $1,070

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Topic 3

Supply and install

situations

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• Must register as a PST collector

• Charge your customers PST on the goods

• Charge your customers PST on the installation services

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Installing Goods that Do Not Become Part of Real Property

If you are supplying and installing both goods that

become part of real property and goods that do not

become part of real property:

• pay PST on the goods that do become part of real

property, and

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Supplying and Installing Both

• register as a PST collector and charge your customers PST on the goods that do not become part of real property and on the related services you provide to those goods.

You are exempt from PST when you obtain goods if they are obtained solely for resale.

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Supplying and Installing Both

Not keeping track of goods installed vs. goods sold to customers

If:

Your business installs goods into real property and also makes retail sales of goods

Then:

You are considered a contractor for the goods you supply and affix, or install, that become part of real property

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Contractors Who Also Sell Goods Without Installation

How do you pay PST when:

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Contractors Who Also Sell Goods Without Installation

Some goods are

installed into real property

Some goods are

sold at retail

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Inventory Management Options

Option 1 – pay PST on all the goods Option 2 – maintain separate inventories Option 3 – purchase all goods exempt for resale

Bulletin PST 504, Contractors Who are Also Retailers or Wholesalers

Topic 4

Real property outside

of BC

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Goods purchased outside BC for use outside BC – no PST paid.

All other purchases of taxable goods will likely require PST to be paid, unless a specific exemption applies.

Real Property outside of BC

Bulletin PST 506 - Real Property Situated Outside BC

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Real Property outside of BC

Not sending us PST you owe on goods bought outside B.C. but used in B.C. to fulfill contracts

Not paying PST on goods used to fulfill a contract outside B.C.

Topic 5

Exemptions

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Exemptions for Contractors

You may be able to transfer the PST liability to your customer if:

• you and your customer have an agreement that states they accept the liability for the PST,

• certain specific conditions are met, and

• it is either a written agreement or signed written statement.

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Exemptions for Contractors

If an agreement is in place, you must:

• be registered as a PST collector,

• charge the PST, and

• remit the PST you charged.

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Bulletin PST 501, Real Property Contractors

• The Government of Canada (unless the Government of Canada has agreed to pay PST)

• Persons who would be exempt from PST if they had obtained the goods instead of the contractor

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Contracts with Persons Exempt from PST

Bulletin PST 501, Real Property Contractors

Fin 491 Certificate of Exemption - Contractor

Don’t Let This Happen to You!

Curt installed windows in his customer’s home. He didn’t pay PST on the windows and he charged his customer the PST.

Curt assumed what he did was okay because he sent us the PST he collected.

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Don’t Let This Happen to You!

Curt was audited and we discovered that he didn’t pay PST on the windows. He was assessed and had to pay the PST, and may be subject to penalty and interest charges.

The customer who paid the PST is eligible to apply for a refund.

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Understand Your Rights

The ‘Taxpayer Fairness and Service Code’ outlines your rights to courtesy, respect, confidentiality, fair treatment, help, information, dispute resolution and timely appeals.

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Resources available on the Ministry of Finance’s website:

• Legislation:

• Provincial Sales Tax Act

• Provincial Sales Tax Regulation

• Provincial Sales Tax Exemption and Refund Regulation

• Publications:

• Guides, Bulletins, Notices, Forms, FAQs

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Resources

• Taxpayer Services: Toll free #1-877-388-4440

• Email: CTBTaxQuestions@gov.bc.ca

• Website: gov.bc.ca/PST

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Contact Information

FluidSurvey:

fluidsurveys.com/s/BCPST-Outreach-Feedback/

Password:

pstinbc

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Survey

When do you pay PST on your goods and supplies?

How does PST apply to goods for resale vs. those you

install?

How does PST applies to goods you use to fulfil a

contract outside B.C.?

Know How the PST Works

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When do you need to be registered to collect PST?

When do you charge your customer PST?

How does PST apply to goods bought outside B.C.?

Know How the PST Works

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This information is provided as an aid to understanding the legislation and is not intended to replace the legislation.

Questions

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