The next step in the return of PST to BC is underway – the business transition phase. This month businesses are receiving a letter from the Provincial Government reminding them that it’s time to organize internally for handling the new “old” PST. Government outreach has begun in earnest to notify, explain, console and, of course, register businesses with PST.
First some background.
The original PST legislation was enacted 60 years ago in July 1948 at 3%. That PST Act, with revision and rate increases, remained in force until the introduction of the HST in July 2010. It combined the PST and GST into one value added tax. In turn, the anti-HST referendum a year later forced the government to reverse course and ultimately re-establish the PST in BC.
The merits of the HST versus the merits of a GST/PST tax regime are not up for debate. However the reality is, the PST system of taxation will cost business upfront with new software and systems, and on an ongoing basis through additional and duplicated business practices and accounting procedures.
And of course, the PST translates into higher prices for consumers. As it was before, any PST paid on products or services a business purchases to carry on its business cannot be netted against the PST collected from the customer. This means the PST cascades through the supply chain all the way to the end product yielding a compounded tax effect buried in the price to the final purchaser.
Yes, a simplified and generalized description but, nonetheless, the mathematics of it. And yes, the HST for the service industry hurt, but the issues it created could have been resolved by varying the application rules on government’s part.
The new legislation enacting the reintroduction of the PST takes effect April 1, 2013, and all businesses have to register and be issued a new PST number – old numbers will not be recognized. Registration begins January 2, 2013 and can be completed on-line. There is a reasonable government website with lots of links at PSTinBC.ca as a start.
The rate? For now anyway, it returns at 7 per cent. And it appears exemptions exist as before for food, most personal services, admissions, memberships, reading materials, children’s clothing, bicycles, transportation fares and real estate.
As for “sin” items, the PST returns to alcohol but the government states that there will be an offsetting decrease on liquor product mark-ups so prices should not be affected.
For tobacco, the PST portion of the HST will be eliminated, but the tobacco tax rate will increase so that the price of tobacco products will remain unchanged.
And for those who can afford vehicles of $55,000 or more, the luxury surtax of 1% to 3% applies once again.
At this time, the government has not released its transition plan to take it through the period surrounding the actual April 1 implementation date. This plan will outline what and when and where items that are purchased will have HST applied or PST/GST.
These transition rules will affect consumers and the timing of some of their purchases, but the real challenge will be for businesses so that their reporting of purchases and sales accurately reflects the tax or taxes that apply. Hopefully this information is quick to come so plans can be made and costly mistakes avoided.
Ron Clarke has his MBA and is a business owner in Trail, providing accounting and tax services. Email him or see previous columns at ron.clarke@JBSbiz.ca