Banka: PST refunds and tax exemptions
Now that PST is back in full force in BC, there are some business cases whereby you can apply for a refund of PST paid on business expenses. You can also apply for a refund of PST paid prior to July 1, 2010. You have 4 years to apply for a refund of your PST paid.
There are specific application forms for the following types of business cases; a motor vehicle or a multijurisdictional vehicle, PAC-funded purchases, production machinery and equipment, qualifying farmers, aquaculturists and fishers. If your refund type does not fall into one of these categories, there is also a general refund application.
An example of when you might use the general application is when you are purchasing items in BC and paying the PST on them but they are being used out of the province. If they are being resold out of the province you can apply for a PST exemption, but if you are using them out of province in your own business, then you are able to apply for a refund of the PST.
The refund application is a very detailed application and several documents are required in order to process the application.
For example, if you are a farmer that owns farm land you will need to provide a copy of your property assessment notice as well as your BC Farmer Identity Card.
You will also need to detail your purchases on a worksheet and provide copies of all your invoices that show a description of the items purchased, name of the seller and the purchase price and provide a total of the PST that you wish to have refunded. You can use an excel worksheet for this purpose, or you can use the worksheet available from the government of BC website.
There are also variations of farmer, such as a beekeeper, or mushroom, egg, hog, poultry, rabbit or fur farmers, first nations farmers, and out of province farmers. The people that participate in these farming variations will also be required to prove the amount of gross income earned from your specific farming activity and will not be able to apply for a refund unless this income exceeds a certain threshold tied to the type of farming business.
Currently when the government of BC receives the application, you can expect to receive an email or letter requesting more information in approximately four to six weeks.
An example of the types of requests that have been received are: more information on what wood and nails purchases were used for, or what some rental equipment was used for. Another question might be which vehicle or machine were batteries, cylinders and valves purchased for. Currently there doesn’t appear to be any relation between the amount of PST refund and the amount of extra detail asked for. It appears that the same scrutiny is used on a file whether the refund is $100 or $1000 which I guess is our tax dollars at work.
However, the listing and the copying of the invoices could be a time consuming task and it is up to the business owner to decide whether they are able to complete the application themselves or to pay someone to complete it for them. If the fee for completing the application and listing is more than the actual refund, it might be wise to give the refund a miss.
Exemptions are available for goods purchased for resale or lease including software or telecommunications services as well as for goods that are going to be incorporated into an item that well be sold. In order for a business to provide an exemption to another business, the PST number of the purchaser must be acquired. You can verify PST numbers on-line at https://www.etax.gov.bc.ca/btp/eservicesReg/_/
If you do not have a PST number, you will need to fill out an exemption certificate. Exemption certificates are available for gifting a vehicle, children’s clothing and footwear, purchase of a vehicle or aircraft for use outside of BC, multijurisdictional vehicle, self-assessment on software, commercial fisher, aquaculturist, farmer, out of province delivery, general, contractor, production machinery and equipment, and subcontractor.
Keeping with our example of a farmer, the exemption application requires the Property Tax Folio number and the exemption will cover items such as coloured fuel, propane, goods and services used in farming, electricity for the farm and any residential buildings on the farm.
Alternatively, the farmer can show a valid BC Farm Identity Card to any supplier to purchase items exempt of tax.
If you require more information, please visit the BC government provincial sales tax website at www2.gov.bc.ca/gov/topic.page?id=589542DDDB6347F7A7C80C1783F4BA6D
Gabriele Banka is a CPA, CGA and the owner of Banka & Company, CGA.
She can be reached at 250-763-4528