On June 26, 2019, TEI filed a letter with British Columbia's Select Standing Committee on Finance and Government Services proposing changes to British Columbia's provincial sales tax. The letter builds on earlier comments made to the Ministry of Finance in letters and meetings with Ministry officials and requested that the proposed changes be considered in conjunction with the annual budget process. The letter was prepared under the aegis of TEl's Canadian Commodity Tax Committee, whose chair is Chantal Groulx. Canadian Commodity Tax Committee Vice Chair Brian Moul and Pilar Mata, of TEl's legal staff, coordinated the development of the Institute's comments.
Tax Executives Institute, Inc. ("TEI") welcomes the opportunity to participate in British Columbia's Budget 2020 Consultation ("Consultation"). TEl's has an ongoing annual liaison meeting in Victoria, British Columbia ("BC") with representatives from the BC Ministry of Finance ("Ministry") Taxation Programs and Tax Policy branches. At these meetings, TEI and Ministry representatives discuss administrative and technical issues relating to British Columbia's Provincial Sales Tax Act ("PSTA"), Motor Fuel Tax Act ("MFTA"), and Carbon Tax Act ("CTA"). TEI appreciates the opportunity to now share its views with BC's Select Standing Committee on Finance and Government Services ("Standing Committee" though the Consultation process and welcomes the opportunity to meet with the Standing Committee to discuss these recommendations further.
About Tax Executives Institute, Inc.
TEI was founded in 1944 to serve the needs of business tax professionals. Today, the organization has 57 chapters in Europe, North and South America, and Asia, including four chapters in Canada. As the preeminent association of in-house tax professionals worldwide, TEI has a significant interest in promoting tax policy, as well as the fair and efficient administration of the tax laws, at all levels of government. Our nearly 7,000 individual members represent over 2,800 of the leading companies in the world. Approximately 15 percent of TEl's members are resident in Canada and many of our non-Canadian members' companies do business in Canada and BC.
Exports-Customers Shipping Property Using Their Own Conveyance
The PST Exemption and Refund Regulation (the "Regulation") provides a point-of-sale exemption for exported tangible personal property ("TPP") but only if the TPP is shipped by the seller to a location outside of BC.
For operational reasons, such as the physical attributes of the item being shipped, the location and capacity of available conveyances, and project requirements, a "Business" operating outside of BC may choose to ship TPP it acquired in BC to a location outside BC using its own conveyance or by directly hiring a common carrier
If the purchaser (in this case, the Business) uses its own conveyance or hires a common carrier to export TPP from BC, it must pay provincial sales tax ("PST") to the seller and claim a refund directly from the Ministry under section 158 of the PSTA, a refund provision specific to TPP exported for business use. The refund process is time consuming for the Ministry and the Business, and essentially taxes exports if the Business is not aware of the refund process. BC-based retailers and wholesalers who sell TPP for export would be more competitive if fewer tax compliance burdens were imposed on Businesses who export TPP using their own conveyances.
By comparison, the Excise Tax Act ("ETA") eliminates the requirement to pay Goods and Services Tax ("GST") and Harmonized Sales Tax ("HST") on TPP exported using a Business' own conveyance or common carrier. Specifically, Section 1 of Part V of Schedule VI to the ETA provides a zero-rating on the supply of TPP exported by a Business if the seller maintains "evidence" of the export of property. Such "evidence" typically includes customs clearance certificates, waybills, movements of dangerous goods tickets, carrier invoices, contracts of sale, purchase orders, and invoices. This zero-rating provision is not available for sales to purchasers that are consumers, thus limiting the zero-rating to exports for business use.
The decision regarding how to transport TPP should be based on operational and environmental concerns only; exporting property using the Business' own conveyance should not create an additional tax and/or compliance burden. TEI thus recommends that the Ministry amend the Regulation to mirror the ETA's zero-rated export provision.
In March 2018, BC amended PST Bulletin 302--Delivery Charges to provide that PST applies to delivery charges incurred at or before title to the goods passes to the purchaser. This was a significant change to the previous version of PST Bulletin 302, which indicated PST did not apply to delivery charges if the goods were purchased from a BC supplier and title to the goods passed at the seller's premises.
When this change was issued, the Consumer Taxation Branch ("CTB") clarified the changes were effective on April 1, 2013. The CTB claimed the retroactive application of the change was necessary because the definition of "purchase price" in section 10 of the PSTA did not support the previous version of PST Bulletin 302.
On March 20, 2018, the Ministry issued a Remission Regulation 48/2018 ("the Remission"). The Remission provides:
Authorization is given for the remission of a penalty under section 203 (1) of the Act imposed on a collector who has not levied tax on the portion of the purchase price of tangible personal property that is a delivery charge, if (a) the sale occurred on or after April 1, 2013 and on or before March 31, 2018, and (b) under the sale, title to the tangible personal property passed, or is to pass, to the purchaser at premises of the collector that are in British Columbia. The Remission thus eliminated the CTB's ability to assess for non-collection of PST on delivery charges prior to April 1, 2018, essentially making the related March 2018 changes to PST Bulletin 302 effective on...