On February 18, 2020, Carole James announced British Columbia’s 2020 budget, her third as Minister of Finance and Deputy Premier. “Budget 2020: A Balanced Plan to Keep BC Moving Forward” focuses on making life more affordable, improving critical services, such as health care and education, and building a strong, sustainable economy. All three years of the fiscal plan are balanced, with projected surpluses of $227 million in 2020-21, $179 million in 2021-22, and $374 million in 2022-23.
This year’s budget included several interesting commodity tax changes, as summarized below.
Provincial Sales Tax (PST) Measures
Taxation of Carbonated Beverages
Food products for human consumption in British Columbia are generally exempt under the Provincial Sales Tax Act. However, under changes announced in this year’s budget, certain carbonated beverages will start attracting PST on July 1, 2020.
The carbonated beverages that will become taxable are those that contain sugar or natural or artificial sweeteners. PST will also apply to all beverages dispensed through soda fountains or similar mechanisms and vending machines. Note that beverages sold through vending machines which do not dispense sweetened carbonated beverages (e.g., bottled water only machines) will remain exempt.
Expansion of Registration Requirements
Effective July 1, 2020, Canadian sellers of goods, as well as both Canadian and foreign sellers of software and telecommunications services will be required to register as tax collectors if specified revenues in British Columbia exceed $10,000. In addition, Canadian vendors of vapor products will be required to register if they cause such products to be delivered to consumers in the province.
Expansion of Pollution Control and Waste Management Equipment Exemptions
The PST exemptions for waste management and pollution control equipment have been expanded by eliminating the restrictions previously in place regarding the location where the equipment is used.
Effective February 19, 2020, eligible machinery or equipment is no longer required to be used substantially at:
- The qualifying part of a manufacturing site, processing plant, refinery, or mine site;
- A well site; or
- A tailings pond related to the mining of minerals.
Removing the above restrictions will make the exemptions available to a broader range of taxpayers.
Electric Aircraft Exemption
The budget introduces a PST exemption for electric aircraft, starting on February 19, 2020. A corresponding PST refund will be available for tax paid on or after that date in relation to the acquisition of non-electric aircraft, parts, and related services to convert an aircraft to operate solely on electric power.
Refund for Real Property Contracts Outside British Columbia
Effective February 19, 2020, real property contractors who perform value-added work on goods, such as improvements or alterations, before installing them into real property outside British Columbia will be eligible for a refund of the PST paid in relation to those goods.
Various other technical amendments will be made to the Provincial Sales Tax Act to:
- Ensure that motor vehicle dealers and manufacturers will be subject to the higher, luxury vehicle surtax rates of PST under the dealer use formula when there is a change in use of a vehicle in their sale or lease inventory, effective March 1, 2020, as follows:
- 15% for vehicles with an average value between $125,000 and $149,999.99; and
- 20% for vehicles with an average value of $150,000 or more;
- Clarify the availability of a PST refund for a vehicle brought into British Columbia for the purpose of being immediately licensed as a multijurisdictional vehicle (MJV), authorize the imposition of a penalty when an MJV exemption is improperly provided, and clarify the requirements for PST collectors to document and keep records related to MJV exemptions, all of which will be effective upon Royal Assent;
- Make sure that PST applies to the fair market value of taxable leased goods included in a bundled lease of taxable and exempt goods or real property, effective February 19, 2020;
- Exclude a right to use coin-operated machines and garbage or similar bins from the definition of a lease, effective February 19, 2020; and
- Eliminate several exemptions for related services when provided by the lessor, or a third party on behalf of the lessor, during the lease period of taxable goods, effective February 19, 2020.
Carbon and Motor Fuel Tax Measures
Carbon Tax Rate Alignment
Commencing April 1, 2020, the province’s carbon tax rates will be aligned with the federal carbon pricing backstop. Accordingly, carbon tax rates have been updated and are available on the Ministry of Finance website. While some of the rates have declined (e.g., gasoline), others have increased (e.g., natural gas).
In pursuance of this alignment, the current carbon tax rates for shredded and whole tires will be replaced by a new rate for “combustible waste,” which will include tires in any form, asphalt shingles, and other prescribed materials.
Going forward, carbon tax rates are expected to be reviewed as part of the federal government’s review of the Pan-Canadian Framework on Clean Growth and Climate Change.
International Fuel Tax Agreement Refund Rates
The refund rates for International Fuel Tax Agreement (IFTA) licensees will also be changed, effective April 1, 2020, to reflect carbon tax alignment with the federal backstop, as noted above. This change is intended to ensure that IFTA licensees pay the correct amount of carbon tax on fuel used in British Columbia.
Tobacco Tax Measures
Beginning on April 1, 2020, a default tax of 29.5 cents per heated tobacco product will be levied. However, the default rate can be changed by regulation for specific heated products. A “heated tobacco product” is defined as a product that contains tobacco and is designed to be heated, but not combusted, in a tobacco heating unit to produce a vapor for inhalation.
In addition, dealers that currently sell heated tobacco products in British Columbia must inform the Ministry of Finance of their intention to continue making those products available for sale in the province by April 30, 2020. Any dealer that intends to sell or use a new heated tobacco product, which has not yet been authorized for use or sale in the province, will be required to provide notification to the Ministry at least 90 days before the intended first sale or use of the product.
Further information on British Columbia’s 2020 budget may be found on the province's website at: https://www.bcbudget.gov.bc.ca/2020/default.htm.
If you have any questions about how these proposed changes might impact your organization, please do not hesitate to call the Ryan TaxDirect® line at 1.800.667.1600.