Indirect Tax News - October 2020

Proposed British Columbia “Netflix Tax” deferred

In February 2020, the province of British Columbia (BC) announced various provincial sales tax (PST) changes, some of which were proposed to take effect 1 July 2020. Most notable of the changes impacted Canadian sellers of goods and Canadian and foreign sellers of software and telecommunication services, requiring such vendors to register to collect 7% PST if specified BC revenues exceed CA$10,000. Due to COVID-19, the changes will not take effect until a new proposed date of 1 April 2021.

Given the low de minimis threshold, many non-resident vendors of software and telecommunication services (such as Netflix) will be required to register and collect the tax regardless of whether the non-resident historically was not viewed as carrying on business in the province. BC follows the provinces of Quebec and Saskatchewan that previously broadened their tax nets to capture non-resident sales in the provinces.

Other matters of note from BC’s February 2020 budget (note, this is not a comprehensive list):

  • Elimination of the PST exemption for carbonated beverages that contain sugar, natural sweeteners, or artificial sweeteners effective 1 April 2021.
  • All Canadian sellers of vapour products will be required to register to collect PST if they cause such products to be delivered to BC purchasers effective 1 April 2021. Also effective 1 January 2020, the BC PST rate on vapour products increased to 20%. Note that the 20% PST rate that applies to vapour products is included in the consideration for the purposes of calculating the federal GST.
  • Effective 19 February 2020 exemptions for pollution control and waste management machinery and equipment have been amended to remove restrictions regarding the location where the machinery and equipment is used.
  • Electric aircraft are exempt from PST effective 19 February 2020.
  • Real property contractors who perform value-added work to goods and then install those goods into real property outside BC can apply for refunds of PST paid on those goods effective 19 February 2020.

Brian Morcombe

Ken Garth