In this article, we’re talking about something that catches a lot of BC business owners off guard - PST self-assessment.
If you’ve ever bought something for your business and didn’t get charged PST, you might actually owe PST to the government.
But don’t worry, we’re going to break it all down so you know when PST self-assessment applies, how to calculate it, and how to pay it.
We’ll also go over some real-world examples to help you figure out whether this is something you need to worry about, and when it might not be worth the hassle.
Let’s dive in!
Who Needs to Self-Assess PST?
So who actually needs to worry about PST self-assessment?
PST self-assessment typically applies to British Columbia businesses.
It happens when they buy taxable goods or services for which they weren’t charged PST at the time of purchase. This occurs most often when buying from out-of-province suppliers who don’t collect BC PST.
Here are some common situations where you may need to self-assess PST:
Buying from an Out-of-Province Supplier
Let’s say you order a new laptop for your BC business from a supplier in Alberta. They don’t charge BC PST because they’re outside the province.
But since you’re using that laptop in BC, you’re responsible for remitting the PST yourself, even though you bought it from out of province.
This doesn’t just apply to laptops. Cameras, office furniture, specialty equipment, and other taxable goods purchased from out-of-province suppliers are all subject to the same rule.
Importing Goods into BC
If you physically bring or ship taxable goods into BC, you may need to self-assess PST.
For example, let’s say you attend a trade show in Washington State and pick up some tools for your business. Since you didn’t pay BC PST at the time of purchase, you’re required to self-assess and pay it when you bring those items back into the province.
This also applies to:
- Machinery or equipment purchased outside of BC and used in your business.
- Promotional materials created in another province but used in BC
- Vehicles or trailers imported into BC for commercial use.
Using Business Inventory for Personal or Promotional Use
If your business buys goods on a tax-free basis for resale, but then uses them for personal use, employee perks, or giveaways, you may owe PST.
For example:
- A clothing store takes some of its inventory and gives employees free jackets for a winter promotion. Since the business originally bought those jackets tax-free, it now owes PST on their cost.
- A catering business buys a set of dishes and cutlery to rent out, but later decides to use them for a private staff event. Even though they were originally purchased for business, using them for non-business purposes means PST may need to be self-assessed.
- A retail store gives away gift baskets as part of a marketing campaign. If the items in the basket were purchased for resale but are now being used for promotions, PST applies.
Taxable Software & Digital Services
This one is often overlooked, but it’s becoming more relevant as businesses rely on cloud-based tools.
Let’s say you subscribe to a cloud-based accounting software like QuickBooks Online or Xero.
Even though the software is accessed online and not physically installed, it’s still taxable if used on a computer in BC.
If the provider doesn’t charge PST, you may need to self-assess and remit it yourself.
These digital services are often overlooked because they don’t involve a physical purchase, but if they fall under BC’s taxable software rules, businesses need to self-assess PST.
The good news is that most major software suppliers know this and have started charging PST appropriately.
CTB Tax Inquiries
This isn’t an exhaustive list; these are just some of the more common scenarios.
The key takeaway here is that If you should have paid PST but didn’t, the BC government expects you to self-report and pay it.
If you’re not sure, you can reach out to your accountant or call the consumer taxation branch toll free at 1-877-388-4440.
This is one of the more helpful and responsive inquiry lines I’ve used and you probably won’t even be on hold very long.
When Does PST Self-Assessment Apply?
Alright, so we know who needs to self-assess PST, but when do you actually need to do it?
When You First Use the Item in BC
PST self-assessment applies as soon as your business starts using a taxable good or service in BC. If you weren’t charged PST at the time of purchase, you’re responsible for calculating and paying it.
If your business is registered for PST, you must self-assess and pay it by the due date of your next PST return.
If your business is NOT registered for PST, you still have to self-assess, and then pay any balance owing by the end of the following month.
For example:
- Let’s say that on February 10th you purchase a $5,000 piece of equipment from Alberta, and the supplier doesn’t charge PST.
- On February 15th the equipment arrives at your BC business location, and you start using it.
- If you’re PST-registered, you must report and pay the tax on your next PST return by the usual due date.
- If you’re not PST-registered, you must submit a casual remittance (Form FIN 405) and pay the tax by the end of the following month, in this case that would be March 31st..
In summary, PST self-assessment applies as soon as your business starts using taxable goods or services in BC.
Next up, we’ll walk through how to calculate the PST owing and how to pay it.
How to Complete a PST Self-Assessment
Now that we know when PST self-assessment applies, let’s go through how to actually do it.
Step 1: Determine if PST Should Have Been Paid
The first step is to review your purchase invoices to check if PST was charged.
- Look at the supplier’s location - if they’re outside of BC, they may not have collected PST.
- Check the invoice or receipt - does it show BC PST? If not, you may need to self-assess.
- Identify whether the item or service is taxable in BC - most goods and software are, but there are exceptions.
If PST wasn’t charged but should have been, move on to Step 2.
Step 2: Calculate the PST Owing
Once you confirm that PST wasn’t collected, you need to calculate how much you owe.
The general PST rate in BC is 7%, but some items have different rates.
For example, PST on liquor is 10%, but PST on vehicles can be anywhere from 7% to 20% depending on the value and type.
To calculate the PST owing, you just need to multiply the purchase price before GST by the applicable PST rate.
For example, if you buy a $5,000 machine from Alberta, and it’s subject to the standard 7% PST, you’d owe $350 in PST ($5,000 × 7%).
Step 3: Report and Pay the PST
How you report and pay depends on whether you’re registered for PST.
If You Are PST-Registered:
- Report the amount on your next PST return, usually filed through eTaxBC.
- Simply add the self-assessed PST amount in the appropriate section and pay it along with your usual remittance.
Here is what it would look like to self-assess PST through eTaxBC
If You Are Not PST-Registered:
- You’ll need to file a Casual Remittance Return (Form FIN 405) and pay the PST by the end of the following month.
- This can be done online through eTaxBC or by mailing the completed form with payment.
Here is what it would look like to self-assess PST through form FIN 405.
Practical Considerations for Business Owners
By now, you understand when and how to self-assess PST. But let’s take a second to talk about some practical considerations for handling it in your business.
Technically, PST self-assessment is required anytime your business buys taxable goods or services and PST wasn’t charged.In practice, some business owners will consider the time and effort involved vs. the potentially small amount of PST owing.
Tracking every small purchase, calculating the tax, and filing the remittance takes time.
The key is to have a practical system in place so that self-assessing PST doesn’t become a major administrative burden.
PST self-assessment might be easy enough to handle in-house if:
- You only occasionally buy from out-of-province suppliers.
- The amounts involved are small and easy to track.
- Your bookkeeping system is organized and up to date.
But if your business regularly imports goods, buys software from out of province, or deals with larger purchases, you may want to work with an accountant to make sure everything is handled efficiently.
Consequences of Not Self-Assessing PST
While it might seem easy to ignore PST self-assessment, there are risks if the government catches a missing payment.
Penalties and Interest
If the BC government finds out you should have self-assessed PST but didn’t, they can charge:
- The full amount of unpaid PST, even if the purchase was years ago.
- Penalties - typically 10% of the tax owed if they determine you should have known better.
- Interest, which accrues daily and can add up over time.
Final Thoughts
If you’re unsure about your PST obligations, it’s always best to get expert advice.
At Avalon Accounting, we help businesses stay on top of PST compliance (among other things) so you can focus on running your business.
Give us a shout if you’re looking for bookkeeping and/or accounting services for your incorporated business.
