Mark Worrall: Leader of indirect tax practice, KPMG
For most B.C. businesses, the biggest issue with the April 1 return to the PST will be the impact the tax will have on the cost of carrying on business in B.C. Under the current HST, with relatively few exceptions, businesses are eligible to recover all of the HST they incur on their expenditures. Under the new PST – as was the case under the previous PST that was abolished on July 1, 2010, when the HST was introduced – generally none of the PST incurred by business will be recoverable.
B.C. businesses will be subject to PST on a variety of expenditures, including the purchase or lease of goods for own use, services to repair or maintain equipment, software, telecommunications and legal services. While there are various exemptions available for certain sectors such as the exemption for manufacturing and processing equipment, all businesses will incur PST they cannot recover. Although a few sectors will see a reduction in costs – including financial institutions and residential landlords – for most B.C. businesses costs will increase, rendering them less competitive in both the domestic and international marketplace.
B.C. businesses will also face increased compliance costs relating to the new tax, including having to modify various systems to account for the PST, instituting policies and procedures to self-assess PST where required, training staff and incurring other administrative costs relating to dealing with two sales taxes instead of one.
Gabrielle Loren: Partner, Loren, Nancke & Company
The transition to GST and PST will allow businesses that are registered for HST to make some decisions now that will save them money in the future. With the new PST coming into effect on April 1, the taxes on many business purchases will not change – under the HST your business is paying 12% tax and under the PST/GST you will also pay 12% tax.
The difference is that after April 1, the 7% PST will not be refundable to your business.
For example, if your business is looking to pay say $1,000 for some new equipment, you will pay $1,120 now and pay the same amount after April 1.
However, your cost for tax purposes up to March 31 for that equipment will be $1,000 but after April 1, it will be $1,070.
From today until transition, you will be able to deduct the HST paid of $120 from any HST collected, but after April 1, you will be able to deduct only the 5% GST paid, thus having $70 less in cash flow.
If your business is considering buying a vehicle, making the purchase now is even more important because, effective April 1, the luxury tax, which applies to vehicles costing more than $55,000, will be applicable.
So what does this mean for your business? Make as many of your big purchases before the end of March so that your business gets to keep more.
Mike Klassen: Director of provincial affairs for B.C., Canadian Federation of Independent Businesses
The CFIB represents 10,000 businesses in B.C. alone, and the answer to this question will be different for each of them. However, there will be some challenges common to most of them, so here are some of the most important considerations.
Registration
Businesses should treat April 1 as a hard deadline for registration. Before then, they need to determine whether the PST applies to their business, learn whether they qualify for exemptions and ensure that they register for their PST number.
Transition
How the tax schemes operate during the transitional period can be confusing, for instance when paying in instalments or over a prolonged period of time, for a single purchase or several in completing a larger transaction. Plan major purchases to take best advantage.
Training and systems
Staff need to be trained in how and when to collect the tax, products need to be repriced and cash registers, accounting and bookkeeping software and websites all need to be updated.
Finally, given that provincial resources might be overwhelmed by 11th-hour applicants, it’s a good idea to avoid leaving everything until the last minute. So get started now, if you haven’t already, and save yourself the headache.
