British Columbia is the last Canadian province to implement online platform rules to address e-commerce businesses. PST on marketplace services other provinces implemented similar rules from 2019 to 2021. However, there are important distinctions regarding the rules for the provincial sales tax (PST) in British Columbia and other provinces. For example, the BC PST on marketplace services requires online marketplace facilitator to collect the PST, not the sellers. The legislation became effective on July 1, 2022, and many such facilitators may be struggling to implement practices to comply with the new rules. If you have questions about the new rules and how they may impact you or your business, consider contacting Jeremy Scott Law by calling (902) 403-7201.
What Is the British Columbia Provincial Sales Tax?
The B.C. PST is a retail sales tax that applies when there is no specific exemption when someone purchases, acquires, or brings goods or services into British Columbia for use here. The standard B.C. PST is 7%.
What Is an Online Marketplace Facilitator?
The British Columbia Provincial Sales Tax Bulletin defines a “marketplace facilitator” as someone who does all of the following:
- Operates, controls and/or owns an online marketplace, whether individually or with others
- In some way is a facilitator of a marketplace seller’s retail sales of goods, taxable services, or software through the online marketplace
- Collects payment for the above.
This broad definition would classify many online businesses that do not have a physical presence in British Columbia as a marketplace facilitator. This means that these entities will be responsible for charging, collecting, and remitting the PST.
Examples of Online Marketplace Facilitators
Some examples of online marketplace facilitators include:
- Online retailers, such as Amazon
- Digital streaming services, like Spotify or Hulu
- Short-term rental platform operators, such as Airbnb or VRBO
Facilitators are often third parties who do not sell items themselves but instead connect suppliers and buyers.
Online Marketplace Services
The PST also applies to some “online marketplace services,” which are defined by British Columbia as services that are provided in some way by a marketplace facilitator or other entities to a seller in the marketplace, including:
- Accepting cancellations, changes, returns, or exchanges of software, goods, or other taxable services
- Advertising
- Collecting payments or facilitating payments and transmitting them to the marketplace seller
- Fulfilling orders or bookings
- Listing sales of software, goods and/or services that are taxable
- Promoting
- Providing customer service
- Providing storage
There is also a catch-all provision that can define services as marketplace services as other services that facilitate an online marketplace seller’s sale of goods, software, or taxable services.
What Do Online Marketplace Facilitators Have to Do Under the New Rules?
British Columbia proposed rules for marketplace facilitators in the 2022 Budget and Fiscal Plan. Under these newly created rules, online marketplace facilitators are required to do the following pertaining to the BC PST on marketplace services:
Registration
Online marketplace facilitators must register for PST. There is a minimum threshold that triggers this requirement of C$10,000 annual gross revenue. If the gross value of sales was less than C$10,000 in the last 12 months or is projected to be less than this amount for the next 12 months, registration is not necessary.
Collection
Under the new rules, online marketplace facilitators are required to collect PST on numerous taxable sales they help facilitate through their marketplace. Collection must also occur for certain online marketplace services, as identified above. Some of the transactions that these new requirements relate to include:
- Retail sales and leases of taxable goods
- Retail sales of software
- Leases of taxable goods
- Accommodations for short-term rentals
These rules pertain to supplies of taxable goods and software shipped for delivery in British Columbia. They also pertain to taxable services and accommodations in British Columbia.
Remittance
Covered online marketplace facilitators must report and remit the collected BC PST to the government of British Columbia on marketplace services.
Online marketplace facilitators subject to the new PST rules are required to identify all affected sales and make sure their systems are updated to comply with the new rules.
Relation to the BC PST on Marketplace Services and Other PST Rules
Like other provinces, British Columbia has enacted a version of the rules that is different from the GST/HST methodology. GST, HST, and QST are collected and remitted by the marketplace operator only in situations in which the marketplace seller is not registered for tax purposes.
However, unlike other provinces that use the PST system, British Columbia is imposing taxes on a wide array of platform fees and marketplace services. Other provinces like Saskatchewan and Manitoba generally do not consider such online marketplace services as taxable under their PST rules.
The new rules absolve marketplace sellers of their obligations to register, collect, and remit PST made through online marketplace facilitators if the facilitator is registered. Therefore, marketplace sellers are no longer required to register for PST so long as the entirety of their sales is made through a registered online marketplace facilitator. Nonetheless, marketplace sellers remain jointly and severally liable for any PST that was not collected and remitted to British Columbia by the marketplace facilitator.
Because the rules regarding PST are different in different provinces and there is not one consistent system regarding taxation in Canada, it is often difficult for businesses to be aware of, understand, and follow the laws, especially when they service multiple jurisdictions. However, they are still required to comply with the rules. A knowledgeable tax lawyer from Jeremy Scott Law can help explain the business’ obligations and help ensure compliance.
Contact Jeremy Scott Law for Individualized Tax Guidance and Representation
If you are confused about the new rules regarding the BC PST on marketplace services, the team at Jeremy Scott Law is here to help you. We are very familiar with these recent changes and can help you put systems in place to ensure you are complying with the latest requirements. Consider contacting our office by calling (902) 403-7201 to learn more about your legal obligations and to determine if your updated policies comply with the new rules.