Sales Tax Fundamentals
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British Columbia new proposed marketplace facilitator law for PST
byMarch 8, 2022
In February 2022, the Canadian province of British Columbia (B.C.), announced a proposed change that would alter its provincial sales tax (PST) rules regarding marketplace facilitators.
What are the changes?
If the amendment passes, B.C. will require marketplace facilitators to charge, collect, and remit PST on taxable sales made through online marketplaces. In this situation, a marketplace facilitator is a person who:
- operates, owns or controls (solely or jointly) an online marketplace;
- through the online marketplace, facilitates a marketplace seller’s retail sales of goods, software or taxable services; and
- collects payment in respect of the retail sales of goods, software or taxable services.
Marketplace facilitators must be prepared to register to collect and remit PST by July 1, 2022, the scheduled day these changes would go into effect.
Who needs to register?
Per the Bulletin, marketplace facilitators are required to register to collect PST if they generate a retail sale of:
- goods that at the time of sale are located within Canada and are sold to a person in B.C.
- software for use on or with an electronic device ordinarily situated in B.C.
- accommodation in B.C.
- taxable services, other than accommodation, to a person in B.C.
There are a few exceptions to the rule. Marketplace facilitators are not required to register if:
- the gross value of retail sales of goods, software and taxable services that the marketplace facilitator made or facilitated in the preceding 12 months was $10,000 or less
- the reasonable estimate of the gross value of retail sales of goods, software and taxable services that the marketplace facilitator will make or facilitate in the next 12 months is $10,000 or less
- there are two or more marketplace facilitators who jointly operate, own or control an online marketplace and at least one of the other marketplace facilitators is registered for PST and will collect all PST payable for those tax
Because the marketplace facilitator is now required to register and collect PST on taxable transactions that are facilitated through the online marketplace, the marketplace seller is no longer required to register and collect PST on these sales. However, marketplace sellers remain liable for any PST not collected and remitted by the marketplace facilitator. For example, if there are sales generated outside of the marketplace.
Taxation of online marketplace services
In addition to the amendments mentioned, the Bulletin also mentions that effective July 1, 2022, an online marketplace service is considered a taxable service at the rate of 7% for PST purposes. An online marketplace service is defined as any of the following services provided by a marketplace facilitator:
- listing sales of goods, software or sales of taxable services
- advertising or promoting
- customer service
- fulfilling orders or bookings
- collecting or facilitating payments either directly or indirectly, and transferring payments to the marketplace seller
- accepting or assisting with cancellations, changes, returns or exchanges of goods, software or taxable services
- Other services to facilitate an online marketplace seller’s sale of goods, software or taxable services through the online marketplace.
Resources for Canadian marketplace facilitators
This new rule will have a huge impact on both marketplace facilitators and sellers, so it’s important to be aware of how these changes will affect your individual business. For more information on this proposed change, we’d advise you to read Bulletin PST 14.