It’s March, the weather is slowly improving and the time has come to start thinking of taxes. Because of COVID-19, The deadline to file your income tax and benefit return will be deferred until June 1, 2020. However, it always pays to be proactive! So, we’re going to take a look at some helpful topics for small business owners and their taxes. This week, understanding the taxes you need to collect.
Whether it’s your first time out, or you’re an old hand at the tax game, tax season can seem a daunting time. With so much information out there – sometimes conflicting – it can be difficult to cut through the noise and figure out your tax obligations. To help, we’ve outlined the basic guidelines any small business can follow to ensure they collect and remit the required taxes in British Columbia.
Need help with any aspect of accounting? Boost Your Business Bookkeeping with help from our friends at Bench.
Provincial Sales Tax (PST)
Provincial sales tax (PST) is a retail sales tax that applies when a taxable good or service is purchased, acquired or brought into B.C., unless a specific exemption applies.
The PST generally applies to:
- The purchase or lease of new and used goods in B.C.
- Goods brought, sent or delivered into B.C. for use in B.C.
The purchase of:
- services to goods such as vehicle maintenance, furniture assembly, computer repair
- legal services
- telecommunication services, including Internet services and certain digital and electronic media content such as music and movies
- Gifts of vehicles, boats and aircraft
Generally, the rate of PST is 7% on the purchase or lease price of goods and services, including the sale of cannabis products. The following goods and services are the exception:
- Accommodation is 8% plus up to 3% municipal and regional district tax
- Vehicles are 7% – 10%, 12%, 15% or 20%
- Boats are 7% to 12%
- Aircraft are 7% or 12%
- Liquor is 10%
- Electricity is 3.5% (effective January 1, 2018)
- Manufactured buildings are 7% of 45% – 55% of the purchase or lease price
You’ll be assigned an ongoing reporting period when you register for PST. Your reporting and paying period depends on your type of business and the volume of your sales.
For information about the B.C. PST visit gov.bc.ca/pst
Federal Tax Requirements
A small supplier does not have to register for a GST account. To be considered as such, your business must be a sole proprietorship, partnership or corporation with $30,000 or less in total revenue in the last four consecutive calendar quarters or in any single calendar quarter.
If you’ll be hiring employees, incorporating, or importing or exporting, you’ll need to register for a business number with Canada Revenue Agency (CRA). For more information regarding the different accounts and how to register, please refer to the CRA website.
Know What Business Expenses You Can Claim
There's no need to pay more taxes than necessary! The good news is, plenty of your day-to-day business expenses are deductible. We recently wrote about the CRA-approved tax deductions you can avail of.
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