PST Re-Implementation for Independent Computer Consultants / Systems Developers Services

On April 1, 2013, the PST will be re-implemented in British Columbia.  As an Independent Computer Consultant / Systems Analyst who has a corporation, I need to know whether I will need to charge my customer PST or not.  Having had my corporation for many years, i.e. prior to the implementation of the HST, I remember that I did not have to charge PST to my clients, only GST!  After the HST implementation, I had to charge the HST which was basically the GST plus the PST!  So, now that the province is switching back to the PST, I wanted to confirm what I should be charging.

I contacted the new Provincial PST department.  The response referred me to 2 documents:

1)  Bulletin SST 040, Computer Software and Hardware  -for information prior to the HST implemention, i.e. how is was implemented the last time we had PST.  The key part of this document for me, who provides software services is:
“Services to Software
Effective February 22, 2006, you do not charge PST on services to software, such as modifying, installing, configuring, repairing, restoring or providing corrective action to software. Installation services related to the purchase of software
You charge PST on the purchase price of taxable software. You do not charge PST on
services to software, including installation services. With most goods, the purchase
price includes any charges for installation that are incurred at, or before, the time when
title passes to the customer. However, since services to software are specifically exempt
from PST, installation charges are not included in the purchase price of software. As
long as the charge for the installation of software is listed separately on the invoice, you
charge PST only on the price of the software, and not on the price for the installation.”

So, this verifies that I was correctly not collecting PST prior to the HST implementation.

2)  Notice 2012-024,
Software  -for information about the re-implementation of the PST.  The key part of this document for me, who provides software services is:
“Services provided to software, including installation and modification services, will not be subject to PST.”

So, according to this bulletin, I will not need to collect PST from my clients.  So, I will be only collecting HST from my clients after April 1, 2013.

So, I would recommend to all Independent Computer Consultants / Systems Developers to read the above 2 bulletins to see how the PST re-implementation will affect them.

Paul Juzkow

President, Luna Systems Corporation

Here is the entire reply that I received from the Provincial PST department:

Thank you for your enquiry.

British Columbia’s provincial sales tax (PST) will be re-implemented effective April 1, 2013, at a general tax rate of seven percent.  The draft proposed consolidation of the Provincial Sales Tax Act (PSTA) is available at http://www.sbr.gov.bc.ca/documents_library/legislation/unofficialPSTstatute.pdf.  The draft proposed consolidation of the PSTA provides a preview of what the re-implemented PST might generally look like as of April 1, 2013 if the proposed amendments are introduced into the Legislative Assembly and approved without further amendment.  The Ministry of Finance continues to work on developing the regulations and consequential amendments that complete the legislative package required to re-implement the PST substantially as it was before harmonization, including the permanent exemptions.

Please note that we cannot provide a ruling on how the PSTA or its regulations will apply until such time that the legislation and regulations are finalized.

You are required to register and collect PST if you make sales/leases of tangible personal property, taxable software or provide taxable services.  Prior to harmonization, sales of custom software and stand-alone IT consulting services were not subject to PST.  For additional information on how the PST applied to computer sales and service prior to harmonization, please see ministry Bulletin SST 040, Computer Software and Hardware and recent Notice 2012-024, Software.

To receive updates about the re-implementation of the PST, please visit the following web page and click the button to “Subscribe To Receive Updates” which is located near the top right of the page:  http://www.sbr.gov.bc.ca/msbr/whats_new/consumer_taxes/whatsnew.htm.

More information on British Columbia’s return to the PST can be found in a new series of PST bulletins and notices, available on the Ministry’s website at http://www2.gov.bc.ca/gov/topic.page?id=0CE539AD86F44033A1C531B9B597EA86

This correspondence describes how the Ministry interprets the relevant tax provisions for information purposes only.  This response may be impacted by variations in circumstance, subsequent changes to legislation or subsequent court decisions.  The Ministry is not responsible for updating this response if there are any subsequent changes to the law.  This response is provided as an aid to understanding the legislation and is not intended to replace the legislation.

Tax Inquiries Ministry of Finance www.gov.bc.ca/consumertaxes