I got to visit the Global TV set again today and this time and the topic was about the tax changes here in regards to the provincial sales tax (PST). I figure as a quick recap for those of you who do live in BC here is the general breakdown that I talked about:
1) HST is being abandoned and various goods and services that are taxable will no longer be charged at a flat 12%. Items will be taxed in two categories consisting of a 5% GST rate and a 7% PST rate if applicable.
2) It’s better to hold off some of your purchases until the PST arrives to save money as many items are only GST applicable. Some examples of items that you will now only pay a 5% tax on as opposed to 12%:
Vitamins and Supplements
Prepared Food, including Restaurant Meals
Basic Cable Television services
Services to Real Property including Repair, Maintenance or
Renovation of Real Property (e.g., Plumbing, Electrical Wiring)
New Homes, excluding manufactured homes
3) Some items may get more expensive as well so be sure to review your service contracts. For example, you may need to pay more if you have a vehicle leasing contract as the rate is now 5% GST + 7-10% PST. Potentially more than the 12% HST rate.
4) A lot of small businesses have yet to register for a PST account and will go through transition pains. Make sure to check your bill that you aren’t being charged with the old HST system.
5) Be sure to take advantage or anticipate any tax deductions that may or may not apply to you if you run a business as PST is not tax deductible cost to a business.
Example of Before:
Business spends $1000 and pays 12% Tax = Total $120 In Tax Paid
Business sells goods to the customer at $1000 and charges them 12% tax = Total $120 In Tax Collected
Business breaks even as they paid $120 in taxes as an expense and collected $120.
Example of Now:
Business spends $1000 and pays 5% GST and 7% PST = Total $120 In Tax Paid
Business sells goods to the customer at $1000 and charges them 5% GST = Total $50 In Tax Collected
Business submits the $70 PST and claims back the $50 in GST. You end up with $70 less than with the HST system.
As I posted before, if you need a list of what items are taxable and which ones aren’t you can find a great list at http://www2.gov.bc.ca/assets/gov/topic/BED47DA4EBDBA60A5F28622B8B2E1451/uploads/whats_taxable_whats_not.pdf
On a side note, it was kind of cool and unexpected to see Trevor Linden there. He was a former hockey player for the Canucks for those who don’t watch hockey. It did feel kind of intimidating to up after him….