Provincial Sales Tax Real Property Contractors
Transcript of Provincial Sales Tax Real Property Contractors
Provincial Sales Tax information session
Real Property Contractors
Trusted financial and economic leadership for a prosperous province
The Ministry of Finance provides outreach
services to assist British Columbians in
understanding and applying provincial tax
legislation.
Ministry of Finance - Outreach
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Interactive online webinars
Industry specific webinars
Tax seminars
Ministry of Finance - Outreach
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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
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
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
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
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
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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• 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
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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.
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: [email protected]
• Website: gov.bc.ca/PST
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Contact Information
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