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%:

Dry Cleaning
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….

Interesting point this was I thought where the other day I was at a restaurant and it came time to pay for the bill. The person I was with was calculating the bill along with another person on what the tip should be based on the usual 10% to 15% figure. They then both came up with different numbers as one person was calculating the total before tax and the other person was calculating it with the tax included. That then brought up a debate that yo should only be calculating the tip based on the meal price itself and not with the tax included.

That makes me wonder how many people calculate it before the tax and how many do it after and whether or not it is unintentional as it is something you don’t really think about. It definitely does add up too when you think about it. As well, do the people receiving it expect to get a tip based on the before or after tax figure? Kind of amazing though at how much debate something that is supposed to be purely based on your generosity can create when it comes to money.

You would think this is common sense but apparently it is a common issue that causes people to spend more money than anticipated. Basically, in most countries there are some kind of sales tax that is placed on top of the purchase price. Apparently, a lot of people neglect to factor that in which in turn causes them to spend more money.

A scenario would be like you have been saving up to buy this new $1000 item that you see on sale. So you save up to buy it. On the actual day when you go to make the purchase you realize it costs more because of the tax. Therefore, you technically went over budget. A more common scenario would be say you bringing in two dollars to buy a drink with the mindset that the price tag is only a dollar. When you go there though you didn’t remember that you are actually spending more because of the taxes. But, you make the purchase anyways.

Kind of an interesting thought as this isn’t something that I thought would be such a huge deal. It is true for myself that I always factor in the taxes though.

I was just reading that story about how the actor Wesley Snipes has apparently been given a prison sentence for evading his taxes for so many years. My immediate reaction to a person like that not paying his taxes is that he probably made so much from his line of work that even if he had to sacrifice his entire pay from a project that he will be well off.

While even I admit that the notion of having to give a large chunk of your income away is undesirable, in some funny ways I have the mentality that paying more as a direct result of the income tax brackets is more of an achievement of sort as for the most part the money is going towards stuff I am using. That doesn’t mean the sense of achievement is you are losing more money and that the more you lose the better.

Rather, it’s kind of like say someone that makes $5000 a year and pays no taxes versus someone that makes say $20,000 and has to pay say $3000. In some ways making that $20,000 and paying the $3000 just seems more like an accomplishment in the overall picture. While it’s not exactly charity, I guess with that mentality you can view it where being in the position to earn that much and paying more taxes is like you are contributing more to you place you live in.

Just one way to look at it I suppose if you dread paying taxes and even fathom the thought like above where you try to avoid doing it all together.

I got an e-mail that I didn’t really think too much of originally. There is one company that I have a few cheques laying around with where they get a commission of the profit that was made from work related happenings. Since they are a business they have to charge GST on it(Which is a 5% tax here). If I don’t finish the transactions and collect the money before next month they will have to charge a 12% tax on that commission instead due to the new changes.

So that should be something to think about for everyone where if there are any payments to collect in the next day or so you should do it now as opposed to procrastinating and risking having to pay more in taxes. If you are a business it could be a benefit to tell your customers to pay you now for certain services too otherwise they will need to pay you more in taxes.