Businesses that were affected by increased taxes when the HST was introduced need to be wary of a potential cash-flow shortage until April 1.
"Contractors, home renovators, anyone who is in the services-type industry that had a big hit when taxes went from 5% to 12% are finding people aren't coming to them right now," said Gabrielle Loren, a partner and executive account manager at Loren, Nancke & Co.
"Be prepared for this because cash flows will be affected."
Consumers can avoid paying an extra 7% tax on certain goods and services by waiting until after the PST is reintroduced on April 1. "But if you're a business registered for HST, make sure that you go out and buy your big-ticket items now," said Loren.
Because the HST is refundable but the PST is not, business purchases made before the April 1 deadline will be entitled to a 12% refund instead of a 5% refund after the switchover. That could create significant savings for businesses buying capital equipment.
"Take advantage of the HST system now, said Loren, "but keep in mind that there are going to be cash-flow issues, depending on the nature of your business."
According to a BC Chamber of Commerce survey, 63% of businesses say they're unprepared for the transition back to the PST.
"Many businesses aren't sure what they're looking at yet, because very few of them seem to have taken much in the way of action to get prepared," said chamber CEO John Winter.
More than 100,000 businesses will need to register to collect PST, and approximately 30,000 of those are new businesses that have not previously collected PST.
"The problem is reaching small businesses because there's a lot of them, and they're not as accessible as many of the large businesses," said Winter.
"We're going to need a lot of help … to ensure that when April 1 happens, transactions are concluded in the proper way and confusion won't be as rampant as it appears to be at the moment." •
What businesses need to know about the PST
The government has brought in new legislation for the reintroduction of PST because the old Social Service Tax Act was more than 60 years old. The new legislation is designed to clarify the language for current technologies and business practices. Consumers will pay the tax on goods and services that were subject to PST prior to the July 1, 2010, introduction of the HST in B.C. but all permanent PST exemptions will remain.
Key points you need to know about the PST's return
- Businesses will need to apply for a new PST registration number before April 1, 2013. They won't be able to use their old PST registration number, but they can use their federal business number to register.
- Businesses can register for PST by fax, mail, online or in person at Service BC locations. New businesses can register online at www.onestopbc.ca. Those that already have a business number can apply on the e-services website.
- Wholesalers and businesses selling only non-taxable or exempt goods or services don't need to register.
- Businesses will be now be able to remit the PST online at the new e-services website, as well as at a bank or by mail.
- Small businesses will have to register for the PST, even if they're currently exempt from HST because they're making less than $30,000 a year.
- Businesses with staff must ensure that all employees fill out a new tax exemption form before April 1, 2013.
- The commission that existed prior to July 1, 2010, will be reintroduced. Businesses can receive a commission of up to $198 per reporting period.
- Businesses with Canadian sales of more than $1.5 million annually must file and remit taxes online.
Specific taxes
- Alcohol sales will be subject to 10% liquor tax.
- The provincial hotel room tax will return, but it will be incorporated into 8% PST. Businesses will no longer be required to fill out a separate form.
- A propane tax will be reintroduced at $0.02.7 per litre.
- PST rates on passenger vehicle sales will be based on a vehicle's sale price: below $55,000 (7%); $55,000 – $56,000 (8%); $56,000 – $57,000 (9%); $57,000 or more (10%).
- Tobacco tax rates will increase to offset the elimination of the provincial portion of the HST, keeping the overall tax on tobacco generally constant.
What the PST is payable on
- The purchase or lease of new or used goods.
- Goods brought into B.C. for use in the province.
- Servicing of goods (vehicle maintenance, computer repair).
- Telecom services.
- Legal services.
Items exempt from the PST
- All food for human consumption (groceries, restaurant meals).
- Commercial and residential real estate.
- Personal services (haircuts, dry cleaning, etc.).
- Admissions and club memberships.
- Bicycles.
- Household energy bills and energy conservation items.
- Books, newspapers and magazines.
- Children's clothing and some school supplies.
- Transportation fares.
- Prescription and over-the-counter drugs and medical products.
- All permanent PST exemptions for business.
Help and contact information
The government is offering businesses one-on-one consultations, interactive webinars and seminars leading up to the April 1 deadline.
For more information, call 1-877-388-4440, email
[email protected] or go to www.pstinbc.ca.
