Over the last few years, Canadian federal government and provinces have been introducing reform after reform to tax collection processes for ecommerce businesses.
British Columbia is the latest province to change the rules for tax collection for e-commerce sellers and online marketplaces.
Starting 1 July 2022, the liability to collect PST on the sale of goods and services to individuals in British Columbia will shift from the sellers to the marketplaces facilitating those online sales. Additionally, marketplaces will need to start charging PST on the services they provide to sellers.
Will sellers need to keep their existing PST registration? How is this new regime going to benefit sellers?
New tax collection requirements for online marketplaces
British Columbia is following the steps of other provinces and countries around the world by shifting the liability to register and collect PST on retail, e-commerce sales from the merchants to the marketplace itself.
Starting 1 July 2022, it will no longer be the merchant’s responsibility to remit the PST on the sales they make to BC customers via an online platform. Instead, the marketplace will need to register and collect the PST due to the authorities.
It is worth noting that the authorities are creating an exemption threshold for small marketplaces, under which the platform operator will not be required to register for PST.
Exemption threshold for marketplaces
In most cases, an online platform facilitating B2C sales of goods and services will have to register and collect PST starting 1 July 2022.
However, this is provided the marketplace’s gross turnover on the retail sales they facilitate in British Columbia in the previous 12 months or estimated turnover in the next year does not exceed CAD 10,000.
The impact of the new regulations on marketplace sellers
With the introduction of these changes, online sellers will no longer need to register for PST in British Columbia unless they carry out taxable activities other than retail sales on a marketplace.
However, sellers will remain jointly and severally liable for any PST not collected and paid for by the marketplace. This means that sellers will have to contact their marketplace to make sure the provincial sales tax is being properly collected and paid to the authorities. Otherwise, a tax assessment may be opened by the authorities to check the liability of the seller.
Additionally, and along with the above-mentioned changes, marketplaces will need to start charging PST on the services that they supply to sellers. These typically include all services a marketplace can offer as part of their store from advertising and commission to fulfilment and shipping.
Preparing for the changes
As a seller using marketplaces to trade in British Columbia, you should consider whether you need to keep your existing PST registration or not come July 1, 2022. Deregistering from PST does not mean that you will be free from all tax liability in this province. On the contrary, as explained in this article, sellers will remain jointly and severally liable for any unremitted PST, and it will be your responsibility to make sure the marketplace you use duly collects and pay PST on the retail sales they facilitate for you.
At SimplyVAT.com our international experts are always happy to help you navigate international VAT and are always at hand to answer your questions. If you’re unsure of your international VAT obligations, or would like to get VAT registered, fill out the form below and a member of the team will be in touch.
"*" indicates required fields