On February 22, 2022, British Columbia (B.C.) Finance released its 2022 budget and accompanying draft legislation, which proposed new provincial sales tax (PST) rules regarding “online marketplace facilitators.” These new rules effectively make online marketplace facilitators liable to collect and remit PST on sales made by marketplace sellers through online sales platforms. The new rules also deem as taxable many of the services provided by online marketplace facilitators to their sellers. The rules are intended to come into force on July 1, 2022.

B.C. is the last sales tax jurisdiction to implement online platform rules dealing with e-commerce businesses, with the Canadian federal government implementing similar rules in July 2021, Quebec in January 2019 and amended in July 2021, Manitoba in December 2021 and Saskatchewan in January 2020.

REGISTRATION, COLLECTION AND REMITTANCE REQUIREMENTS

Effective July 1, 2022, online marketplace facilitators (including non-residents of B.C.) will be required to register for PST, and to collect and remit PST on taxable sales or leases made in B.C. that are facilitated through its online platform. An online marketplace facilitator is defined in the draft legislation as a person who:

• Operates, owns or controls (either solely or jointly) an online marketplace;

• Facilitates through the online marketplace an online marketplace seller’s retail sale, provision or lease of goods, software or taxable services; and

• Collects payment in respect of such sales or leases.

These new obligations apply to retail sales and leases of taxable goods, the provision of taxable services including accommodation in B.C. such as short-term rentals, and retail sales of software that are made through an online marketplace.

There is a C$10,000 annual gross revenue threshold for online marketplace facilitators before they are required to register for PST. The draft legislation provides for an exception to the registration requirement where an online marketplace is jointly operated by more than one entity and at least one of the other entities are registered.

Marketplace sellers will be relieved of their obligations to collect and remit tax on their sales and leases made through an online marketplace where the online marketplace facilitator is registered for PST, regardless of the seller’s own PST registration status. As a result, marketplace sellers are not required to register for PST if all of their sales are made through a registered online marketplace facilitator, though such sellers would still be required to register for, collect and remit PST to the extent they make any taxable sales outside of the online marketplace.

ONLINE MARKETPLACE SERVICES

Unlike Saskatchewan and Manitoba, the B.C. draft legislation deems a broad range of “online marketplace services” provided to marketplace sellers to be taxable services. These services include:

• Listing sales of goods, software or taxable services;

• Advertising or promoting;

• Customer service;

• Storage;

• Fulfilling orders or bookings;

• Collecting or facilitating payments and transmitting payments to the marketplace seller;

• Accepting or assisting with cancellations, changes, returns or exchanges of goods, software or taxable services; and

• Other services to facilitate an online marketplace seller’s sale of goods, software or taxable services through the online marketplace.

The application of PST to these services is in contrast to the online marketplace rules in Saskatchewan and Manitoba where these types of services are generally not considered taxable under their respective provincial sales tax rules.

CONCLUSION

As noted above, B.C. is the last Canadian sales tax jurisdiction to implement online platform rules dealing with online marketplace facilitators. Like the other PST provinces (Manitoba and Saskatchewan), it is enacting a version of the rules that is different from the GST/HST and QST regime – those taxes are collected and remitted by the marketplace operator only where the marketplace seller is not registered to collect the taxes. Unlike the other PST provinces, however, B.C. is applying taxes on a wide range of platform fees. The patchwork of conflicting rules within Canada makes compliance particularly difficult for non-resident platform operators who are trying to program systems in multiple jurisdictions in order to collect and remit taxes in accordance with laws that purport to apply to non-residents outside their borders.