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January 16, 2013

Industry prepares for sales tax transition in B.C.

Construction businesses in B.C. are concerned about the re-implementation of the Provincial Sales Tax (PST) and are preparing for the change by attending a series of workshops being held across the province by an accounting consultant.

“They don’t like the transition back at all. No one has said we like this,” said construction accountant and business management consultant Ron Coleman.

“The consensus is that this is a retrograde step. The biggest concern is that we are only a few weeks away and legislation has not been passed. So, it is difficult to get definitive rulings.”

The PST will be re-implemented at a general tax rate of seven per cent on April 1.

The provincial government opened up registration on Jan. 2, for all businesses to collect the tax, including contractors that sell construction services. The re-implemented PST will be a retail sales tax that is payable when a taxable good or service is acquired for personal use or business use.

The PST will apply to the same goods and services that were subject to PST prior to the implementation of the Harmonized Sales Tax (HST), unless a specific exemption applies.

After voters in B.C decided to extinguish the HST in a referendum, former Finance Minister Kevin Falcon said the provincial government will reinstate the combined 12 per cent PST and GST tax system.

Transition rules for the re-implementation of the PST are currently being developed and have not been finalized.

As a way of helping contractors prepare for this change, Coleman is holding workshops that focus on the transition process and how to handle transition contracts, as well as contracts that won’t be quoted until after April 1.

For example, Coleman said it appears inventory that is on hand as at March 31, 2013, which is to be used in supply and install contracts subsequent to that date, will be subject to PST.

A ruling provided by the Ministry of Finance in December 2012 said contractors do not have to self-assess PST on inventory on hand as of April 1, 2013.

However, contractors will be required to self-assess PST on the basis of the date on which the goods are used, if PST was not already otherwise payable.

In addition, Coleman said contractors should make sure they include a clause in contracts that will be in progress on or after April 1, 2013 to cover any additional cost due to changes in taxation.

In most cases, the cost of materials installed after March 31, 2013 will be 7 per cent higher, unless PST exemptions are in place.

All materials, supplies, and rental equipment on the job will be subject to the PST, but some customers will be PST exempt.

Last week, the B.C. Ministry of Finance released a draft consolidation of the provincial sales tax statute, which will take effect on April 1, 2013.

The draft consolidation is subject to approval of the legislature, but it offers a preview of what the final PST act would generally look like.

Final amendments leading to the re-implementation of the PST are to be formally introduced to the legislature in February 2013.

Coleman will be holding two separate workshops on the transition to PST for the Mechanical Contractors Association and the Refrigeration and Air Conditioning Association on Jan 17.

He will also be holding workshops for the Vancouver Island Construction Association in Nanaimo and Victoria on Jan. 21 and 22.

Two more workshops will be held for the Mechanical Contractors Association in Kelowna on Jan. 24 and the Vancouver Regional Construction Association (VRCA) on March 6.

Coleman gave his first workshop for the VRCA on Dec. 12 to a group of about 55 people and another in January.

The workshop was held for the Roofing Association of B.C. on Dec 19.

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