Anonymised, illustrative composite. One election, one federal tax, and a second, wholly separate provincial tax that the parties didn't realize was still live.
At a glance
An equipment-rental business in the BC Interior was sold to a competitor as an asset deal for $1,300,000, allocated $540,000 to tangible personal property (rental equipment, tools and shop fixtures), $650,000 to goodwill, and $110,000 to leasehold improvements. Both parties' counsel were experienced with federal HST mechanics and, early in the deal, agreed to jointly elect going-concern treatment under the Excise Tax Act so that GST would not change hands on closing.
The closing checklist, built substantially around that federal election, treated “sales tax” on the deal as a solved problem once the election was signed.
In finalizing the closing statement, the buyer's accountant — new to BC deals, having worked mostly on Ontario transactions — asked a simple question that the rest of the deal team had not: what does the federal election actually cover? The answer was GST/HST, a federal tax under Part IX of the Excise Tax Act. British Columbia's own Provincial Sales Tax Act is an entirely separate statute, administered by a different government, taxing a different (though overlapping) category of property. The federal election is silent on it, and does nothing to relieve it.
Tangible personal property in the deal: $540,000 (equipment, tools, shop fixtures). Goodwill and leasehold improvements — $650,000 and $110,000 — are not tangible personal property and were not subject to the tax that applied to the equipment.
BC's general PST rate applies to tangible personal property; at that rate, tax on the $540,000 came to $37,800 — unbudgeted, discovered only in the final reconciliation before closing.
PST Act s.37(1), marginal note “Tax on purchase”, provides: “A purchaser who purchases tangible personal property at a sale in British Columbia must pay to the government tax at the applicable rate under section 34.” Section 34 fixes the general rate for tangible personal property at 7% of the property's value. Nothing in s.37, or anywhere else in the Act, cross-references or defers to the federal Excise Tax Act's going-concern election — the two statutes operate independently of each other.
A full-text search of BC's entire Provincial Sales Tax Act and its exemption regulation turns up no occurrence of “sale of a business,” “going concern,” “bulk sale,” “wholly owned” or “related corporation” — there is no business-sale relief mechanism in British Columbia's PST regime at all, for related parties or arm's-length purchasers alike. Every purchaser of tangible personal property in a BC asset sale owes PST on it, subject only to the Act's ordinary, narrow exemptions (for resale inventory and similar categories), regardless of how the deal is otherwise structured or elected.
Read the unit. The federal election governs one tax, administered under one statute, on one legal basis. BC's PST is a different tax, under a different statute, triggered by a different legal event (a purchase of tangible personal property at a sale in the province) that happens, in an asset deal, to fall on much of the same property. Filing the federal election says nothing at all about the provincial one.
The parties amended the closing statement to add a PST line item on the tangible personal property, which the buyer paid directly to the province as required. The deal still closed on schedule, but only because the gap was caught days before closing rather than discovered afterward — there was no election or relieving mechanism available to retroactively undo the obligation once the sale had occurred.
Had the gap not been caught, the buyer would have closed without remitting PST on $540,000 of equipment it had acquired — a liability that does not expire simply because nobody noticed it at closing. BC's PST regime enforces this obligation directly against the purchaser; discovering it on a later audit, with penalties and interest accruing from the original transaction date, would have cost materially more than the $37,800 base tax itself.
The tell was the word “sales tax” used loosely to mean only the federal tax the deal team was most familiar with. In a province that levies its own separate retail sales tax, that shorthand hides a second, unrelated statute. The federal going-concern election is a complete answer to GST/HST. It has never been, and was never meant to be, an answer to anything provincial.
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