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Sales Taxes -> BC HST
BC Tax -> BC HST
GST/HST -> BC HST

BC Harmonized Sales Tax (HST)

British Columbia harmonized its provincial sales tax (Social Services Tax, aka PST) with the Federal goods and services tax (GST) effective July 1, 2010.  The Consumption Tax Rebate and Transition Act, which eliminated the PST and prepared BC for the HST, was passed in the BC legislature on April 29, 2010.

Return to the PST April 1, 2013

Effective April 1, 2013, BC's 12% HST will be replaced by the GST and the PST.  As a result, the BC basic personal amount tax credit will be reduced for 2013 (eliminating the increase that was done due to the implementation of the HST), the quarterly HST credit will be eliminated, and the refundable Sales Tax Credit will be reintroduced.  See the BC 2012 Budget page for more information on these items, and for information on the increased HST rebate threshold for new home purchases.

Our BC PST page has information regarding the PST, which we have reviewed and updated relating to the re-implementation of the PST.

The federal Department of Finance has published proposed transitional rules, which describe how and when the HST would cease to apply to transactions that straddle the BC HST end-date.

Canada Revenue Agency has published the following notices regarding elimination of the HST in BC in 2013:

Notice270 Questions and Answers

Notice 276 Transitional Rules for Real Property Including New Housing

BC HST Referendum

The BC HST Referendum, done by mail-in ballot, closed on August 5th.  The results were 54.73% in favour of extinguishing the HST.  We are now going back to the archaic PST system.

It was announced in a Ministry of Finance news release on August 26th that it is expected to take a minimum of 18 months to re-implement the PST system.

The HST in BC website did a good job of presenting the facts.  It was a non-partisan website, now unavailable.

On May 25, 2011, the BC government announced in a news release that if the HST is kept, the rate will be reduced to 11% on July 1, 2012, and to 10% on July 1, 2014.  Also, one-time payments of $175 per child will be issued to families with children under 18 years old, as well as to low- and modest-income seniors.

See our article on Why the HST is good for BC.

 

About the HST

The previous PST rate in BC was 7%, which, when combined with the GST resulted in a harmonized sales tax (HST) rate of 12%.

The implementation of HST in BC will be good for the economy, which will be good for job-seekers and consumers.  It removes a consumer tax (PST) which is costly for businesses and government to administer.  Even a small business (such as a self-employed person) which is not required to register to collect GST has to register to collect PST if it sells or provides any amount of a product or service which is subject to PST.  The government has auditors who must audit businesses, businesses have accountants who must report on and remit the tax, and too often, lawyers and the courts are brought into the picture because the Social Services Tax Act has many parts that are open to interpretation.  The implementation of the HST eliminates an entire level of bureaucracy, which is always a good thing!

There will be a slight increased cost to consumers to start, but because this is a consumption tax, those who spend the most will pay the most.  Those with low incomes will be affected the least, because they spend the least, and a higher proportion of items purchased by low-income people are not subject to HST, such as basic groceries, housing, residential energy, and insurance.

Another advantage of going to HST is that tax will no longer be payable on most used goods purchased privately.  However, used vehicles, aircraft and boats purchased privately (not from an HST registrant) would still be subject to provincial sales tax, which is being increased from 7% to 12%.  If an HST registrant purchases a used vehicle privately, the 12% PST paid on the transfer of the vehicle is not recoverable as an input tax credit.

Almost everything that was subject to PST when purchased new was also subject to PST when purchased used.  Exceptions to this were used clothing or footwear priced at less than $100, and certain used manufactured homes.  Most people were not aware that the Social Services Tax Act required them to remit the tax to the government when they bought used goods privately, or when they purchased something from an out of province seller.  We would guess that most people didn't remit the PST on this type of item, and were therefore in contravention of the Social Services Tax Act.

Input Tax Credits

Businesses which are registered to collect GST or HST can claim input tax credits to recover the GST or HST that they have paid, with certain temporary exceptions for large businesses (see below).  The change to HST will mean a significant savings and boost in productivity for businesses in BC, because:

bullet they no longer have to pay PST
bullet they no longer have to prepare PST remittances
bullet they save on consulting costs - the PST rules were very complicated, and frequently required professional advice in their interpretation, and courts to determine the correct interpretation
bullet employees will spend much less time trying to find the answers to PST questions
bullet PST audits will be eliminated

There are temporary restriction on input tax credits on certain items for large businesses (generally, those with over $10 million of taxable, including zero-rated, sales) and financial institutions.  The restriction only applies to the provincial portion of the HST.

What is Taxable?

Consumers now have to pay 12% HST on all goods and services on which they previously paid 5% GST, except for several items which were previously PST exempt and are not subject to the provincial portion of the HST.  These items are:

bullet gasoline and diesel fuel for motor vehicles
bullet books
bullet children's-sized clothing and footwear
bullet children's car seats and car booster seats
bullet diapers and feminine hygiene products
bullet residential energy - see Residential Energy Credit and Rebate article

In their September 2009 Budget Update, the provincial government announced that it will provide a provincially administered HST exemption for residential energy use.  This was included in their HST backgrounder (pdf) document.

The provincial HST Information Office had a website to provide facts about the HST, but the website is no longer operational.

Other provisions of the HST:

bulletNew housing rebate for new homes purchased as a primary residence - a partial rebate (71.43%) of the provincial portion of the HST for new housing to ensure that new homes up to $525,000 (increased from $400,000) bear no more tax than under the previous PST system, while homes above $525,000 receive a flat rebate of $26,250
bulletEnhanced new rental housing rebate, same as above rules for new primary residence homes - available to landlords who
bullet purchase newly constructed or substantially renovated rental housing which is subject to HST, or
bullet construct or substantially renovate their own rental housing, and are required to remit HST under the self-supply rules.
bullet a refundable BC HST credit is paid quarterly with the GST and carbon tax credit to offset the impact of the tax on those with low incomes.  The first payments were issued in July 2010.
bulletRestricted Input Tax Credits (RITC) - There is a temporary delay in the provision of input tax credits for certain purchases by businesses with taxable sales in excess of $10 million.

Farmers in BC

Previously, farmers were exempt from paying PST on the cost of many items purchased for use in the farming business.  If a farmer is registered to collect GST/HST, any HST paid on costs for the farming business are recoverable as input tax credits. As most agricultural products are zero-rated (they are considered taxable, but the HST rate is zero), very little or no HST would be collected.  Many farmers are small suppliers, so registering to collect GST/HST is not mandatory, but may be to their advantage in order to recover HST paid.  See Who has to register to collect GST/HST?

 

General Transitional Rules for BC HST

Transitional rules are required to determine which tax - the existing PST (Social Services Tax) or the BC component of the HST - would apply to transactions that straddle the July 1, 2010 implementation date.

November 18, 2009 - New home sales - Grandparenting

Where written agreements of purchase and sale are entered into on or before November 18, 2009, and both ownership and possession of the homes are transferred under the agreement after June 2010, the sales will be subject to the federal component of the HST, but not the provincial component.  This would apply to sales of newly constructed or substantially renovated single-unit homes to individuals, and to sales of residential condominiums to all persons including individuals.

Sales of these grandparented homes would not be eligible for the new housing rebate or new rental housing rebate.

October 14, 2009

Certain purchasers that are non-consumers may have to self-assess the BC component of the HST on consideration that becomes due, or is paid, after October 14, 2009 and before May 1, 2010 for goods and services provided on or after July 1, 2010.  This would not apply if the non-consumer is a GST registrant and would therefore be entitled to an input tax credit.

Note:  Consumer means an individual who acquires goods or services for the individual's personal consumption or use or for the personal consumption or use of another individual.

A GST registrant in BC or Ontario should not be collecting the provincial portion of the HST prior to May 1, 2010, for goods or services provided in BC or Ontario, even if the goods or services are to be provided on or after July 1, 2010.  Prior to May 1, only the 5% GST should be collected for these goods or services.

May 1, 2010

The HST would generally apply to consideration that becomes due or is paid on or after this date, for property and services provided on or after July 1, 2010.

Some items addressed in the HST transitional rules:

bullet Funeral services - HST does not apply to funeral services where the contract is entered into before July 1, 2010.
bullet Transitional PST inventory rebate for residential real property contracts - A rebate is available for PST embedded in construction materials purchased before July 1, 2010, but used in residential property contracts on or after July 1, 2010.
bullet Subscriptions to newspapers, magazines and other periodical publications - HST does not apply to subscriptions paid before July 1, 2010.
bullet Passenger transportation services - HST generally does not apply to the cost of continuous journeys that commence before July 1, 2010.
bullet Freight transportation services - HST generally does not apply to the cost of a freight transportation service performed on or after July 1, 2010 if the service is part of a continuous freight movement of goods that begins before July 2010.

See also:

Residential Energy Credit and Rebate

For further information on the BC HST and the transitional rules, see the following on the BC Ministry of Finance website

bullet News Release
bullet Harmonized Sales Tax and HST General Transitional Rules
bulletRebate threshold and transitional rules for new housing - no longer available
bulletPoint-of-Sale Rebates for BC HST - no longer available

Canada Revenue Agency information:

bullet All Forms and Publications for GST/HST
bullet Notice246  Harmonized Sales Tax for BC - Questions and Answers on Housing Rebates and Transitional Rules for Housing and Other Real Property Situated in BC.
bullet GST/HST Information SheetsTransition to the Harmonized Sales Tax:
bullet GI-053 Freight Transportation Services
bullet GI-054 Passenger Transportation Services
bullet GI-055 Transportation Passes
bullet GI-056 Services
bullet GI-057 Memberships
bullet GI-058 Admissions
bullet GI-059 Intangible Personal Property
bullet GI-070 Goods
bullet GST/HST Information Sheets:  Harmonized Sales Tax:
bullet GI-061 Point-of-Sale Rebate on Motor Fuels
bullet GI-062 Point-of-Sale Rebate on Feminine Hygiene Products
bullet GI-063 Point-of-Sale Rebate on Children's Goods
bullet GI-065 Point-of-Sale Rebate on Books

 

Revised: February 24, 2014

 

 

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