The British Columbia Provincial Sales Tax (PST) is a retail sales tax. It is charged on most goods and services that are acquired, purchased or brought into the province of British Columbia. 

 

Formerly called the Social Services Tax (SST), it applies to the purchase of both old and new products or services in BC. If a resident of BC buys or leases taxable goods from outside BC, the PST gets applied (and payable) when it is brought into BC.

 

In this blog post, we will be explaining how the PST applies to real property contractor within the construction industry in BC. If you are a contractor or subcontractor in the construction industry in BC, this is for you.

 

When done reading this blog article, you will be well informed on what the PST is all about, how it is applied, and how to go about it.

 

Before we take a deep dive into the meat and potatoes of this article, let us first define some key terms that relate to the BC PST.

 

What is Real property?

 

Real property is a piece of land or anything that is affixed to land, such that it becomes an integral part of that land (real property) afterwards. Typically, this includes structures, buildings and items such as equipment and machinery that are attached to structures and buildings via a means other than their weight.

 

Who is a Contractor?

 

According to the BC bulletin for real property contractors, anyone who engages in the supply, fixing or installation of goods that becomes a part of a real property is seen as a contractor.

 

This definition applies to all subcontractors and contractors alike within the construction industry. The rule of thumb to follow in determining if you are deemed a contractor (that’s duty-bound to pay PST) is a simple one.

 

If you check any of the boxes below, then you are a contractor:

 

• Supply goods and render installation services on said goods, such that they become part of real property, and…
• Supply goods in the line of providing you services to a client, such that it becomes a part of real property. Examples are electricians, plumbers, carpenters, fence builders, roofers, window installers, painters, etc.

 

Some other examples of contractors who are duty-bound to pay PST in BC are:

 

• Excavators
• Foundation contractors
• Kitchen installers
• Heating system installers
• Sheet metal contractors
• Siding contractors
• Sundeck builders
• And much more…

 

 

How Does PST Apply To Contractors?

 

As a contractor or subcontractor, in the course of rendering your services to clients, you are viewed as the end user of the materials being used to fulfil the contract. As a result of this, you are to pay the PST on such taxable goods - and NOT charge your client PST.

 

You are also mandated to pay PST on taxable goods acquired and used for fulfilling contracts on real properties that are outside of BC.

 

When Do you Collect PST?

 

There are specific scenarios where you are not the end user and must collect PST on taxable goods. Listed below are some of those scenarios:

 

• If you install goods that do not become an integral part of real property. An example of this is supplying and installing a potted plant for a client in his building or structure.

 

• If you are a contractor, who sells goods without installation services, that is, you run a retail or wholesale facility that solely focuses on the resale of concerned goods.

 

 

 

How to Pay PST

 

You can remit the PST you owe, as well as those charged to clients, to the government through either of the following means:

 

• Online using eTaxBC
• Through your bank
• At a government office
• By mail or courier

You can use any of the channels listed above to remit your PST to the government if your business has $1.5 million or less in total Canadian lease and sales volume for the year in view.

 

For sales volume above that, the payment must be made electronically.

 

Need help filing? Call us at 604.801.5789.

 

 

The T5018 is an annual information return that is used by the Canada Revenue Agency (CRA) to stop or mitigate underground economic activities within the construction industry in Canada. 

 

Who Files a T5018 Slip?

 

The T5018 information return is to be filed by any corporation, partnership, trust or individual, that has construction as its source of primary business income. If your business generates more than 50% of its business income through construction activities, then you are required to file a T5018 information return.

 

Additionally, in a year, if you have made payments for construction services above $500 to subcontractors (or received credits from them), then you are also mandated to fill the T5018 slip. 

 

Process for Filing an Information Return Slip

 

Residency status determines the specific information slip that’s to be completed.

 

Subcontractors who are residents of Canada are required to report contract payments on a Contract Payment Information Return. This information return consists of a T5018 slip and summary, and it covers construction services executed within and outside of Canada.

 

Subcontractors who are not Canadian residents are to complete the T4A-NR information return, which includes a T4A-NR summary and slip.

 

Regardless of the information slip you are to file, it can be done either by yourself or your accountant on the CRA website. It can be done via the My Business Account portal or Represent a Client portal respectively. You can file as many slips as needed via these portals on the CRA site.

 

When Are You to File the T5018 Return Information?

 

You can file the T5018 on a fiscal-year basis, or calendar-year basis. Regardless of the reporting cycle you choose, the return is due six months post the reporting period.

 

If you want to make changes to your current reporting period, you will need approval from the CRA.

 

Should your business stop operating, you are required to file the information return within 30 days post-closure of the business.

 

What Are the Penalties for Not Filing Your T5018 Return Information?

 

There are strict penalties for late submission or failure to submit your return information after the expiration of the reporting period.

 

Each slip is counted as separate information return, and the CRA will penalize you based on the number of slips submitted late - or not submitted at all. The number of late days is used to calculate the penalty fee.

 

Interest will continue to accrue on the penalty sum until it is paid in full.

 

Additionally, any contractor that cooperate with a subcontractor to conceal financials, to avoid taxes, could face criminal charges. They could also be penalized with fines up to 200% of the taxes they tried to evade.

 

Conclusion

 

The T5018 is the primary means the Canada Revenue Agency (CRA) uses to track financial activity between employers and subcontractors to ensure that all earnings and taxes are paid correctly and on time.

 

If you need help with filing T5018 forms, feel free to contact us at 778.801.5789 or email to jluk@bloomaccounting.ca