PST Collection and Remittance for Real Property Contractors

The Parksville & District Chamber of Commerce and the Qualicum Beach Chamber of Commerce have been advised of a possible issue with the collection and remittance of PST by Real Property Contractors. PST is a complicated tax, and even more so for contractors.  Currently, there are situations where the provincial government is receiving two PST remissions from contractors on the same item.The contractors who are impacted by this situation are those who install fixed products into permanent structures.  They are called Real Property Contractors.   The term, “fixed product” refers to immoveable items such as toilets, flooring, cabinets, light fixtures, security systems, etc.  By law, contractors must pay PST when they purchase products to be installed.  Customers are then invoiced with the PST absorbed in the entire price of the completed project.  They are not charged PST separately.Unfortunately, some contractors are making honest mistakes by purchasing these products as PST-exempt items, as if they are purchasing for retail only and not for installation.  These contractors are then installing the product, charging PST to the customer and remitting that PST to the government.  In the latter case, the government has now received the PST remittance.  However, the government is assessing many contractors for their error and then, through an intensive PST audit, assessing penalties and requiring them to remit PST a second time on the purchase price of the product, stating that the contractors have collected PST incorrectly.  Essentially, the government is then receiving double PST on each of these incorrect purchases.  In many cases, businesses have overpaid by tens or hundreds of thousands of dollars. 

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The Government says that the only way contractors can recover the cost is to go back to their customers and ask them to pay the PST back to the contractor, which no business will do. The provincial government believes this situation is limited to a very few businesses.  We are wanting to talk to local contractors if they are experiencing a similar situation.  If we can demonstrate to government that this is a far-reaching issue, we may get more traction in our discussions. We understand that many businesses have not spoken up about this because it may be embarrassing for them to admit.  We want to hear from you to correct this over taxing and want you to understand that we believe you are not alone and there is a possibility of compensation if everyone speaks up.  Ultimately, we would like to ask the provincial government to remove “Real Property Contractors” from the PST Act and have PST charged to the customer in all cases, with the exception of new construction builds.

 

 

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