A buyer of business assets in British Columbia pays 7 per cent provincial sales tax on the tangible assets in the deal, on top of 5 per cent GST. They are two taxes under two statutes, and the going-concern election in Excise Tax Act section 167 cannot switch off the provincial one.
Key takeaways
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Part 3, Division 2, one sentence long. Section 37(1) reads: “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(1) sets a rate that “is 7% of the purchase price of the tangible personal property”.
Section 1 defines tangible personal property as “personal property that can be seen, weighed, measured, felt or touched, or that is in any other way perceptible to the senses”, plus electricity, heat and affixed machinery. “Sale” is as wide, reaching “a transfer, conditional or otherwise, of title to or possession of tangible personal property under a contract”, barter, and transfers on a winding up.
Vehicles are the exception, usually a harmless one. Section 34(3) sets a rate that “is 12% of the purchase price of the vehicle, boat or aircraft”, but subsection (5) drops it back to 7 per cent where the buyer acquired it “at a sale in Canada that is a taxable supply under Part IX” of the Excise Tax Act by a registrant — which a GST-registered vendor selling its own fleet is.
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GST is imposed federally by Excise Tax Act section 165(1) at “the rate of 5% on the value of the consideration for the supply”. PST is imposed by a British Columbia Act on a British Columbia purchaser.
Section 167, marginal note Supply of assets of business, lets the parties elect where the recipient acquires “all or substantially all of the property that can reasonably be regarded as being necessary” to carry on the business. Subsection (1.1)(a) then provides that “no tax is payable in respect of a supply of any property or service made under the agreement” — all of it, in the section’s own words, for the purposes of Part IX. See our siblings on the election and the GST44.
What it does not reach is section 37. File the election, treat the deal as tax-free, and you have removed the 5 per cent and left the 7 standing. Treadstone Law’s British Columbia page puts it practically: “used equipment and other tangible assets in the deal generally attract 7% PST, which gets planned for rather than discovered”.
The province did harmonise once, and reversed it: the Ministry of Finance dates the present tax to “the current B.C. PST that was implemented on April 1, 2013” — Bulletin PST 210 — and the regulation still asks whether federal tax was paid “as a participating province under Part IX of that Act”.
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Search the consolidated Act for “going concern” and there is nothing. It is not in Part 6, the exemptions Part, whose nine sections cover food, fuel, electricity, industrial inputs and property bought for lease.
It appears in the exemption regulation four times, in sections 59 and 68, and both are about software. Section 59(3) exempts custom software “sold, as part of a business sold as a going concern, by a person who retains no rights or interests” in it. The concept is recognised for one asset class and stops there.
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Section 37 reaches only tangible personal property, so the intangible half of a sale sits outside it. The ministry’s buying and selling a business page lists as non-taxable: receivables, franchise fees, goodwill, inventory bought for resale, permits and certain licences, real property, and shares.
That creates a temptation the ministry names: “The purchaser and seller cannot agree to increase the price of goodwill and reduce the price of the taxable assets below the fair market value to avoid paying PST.” The Act backs it with a valuation power: section 27 lets the director determine fair market value and deem it the purchase price. Allocation is negotiated, as Treadstone Law’s Ontario income-tax answer on who controls it says — but a schedule that cannot survive a valuation is not protection.
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Real property is outside PST. Affixed machinery is not, because paragraph (d) of the definition of tangible personal property puts it inside: “machinery, equipment or apparatus that is used directly in the manufacture, production, processing, storage, handling, packaging, display, transportation, transmission or distribution of tangible personal property”, affixed so that it ceases to be personal property at common law. Heating, lighting and elevators are carved out.
What is left is the productive plant. The ministry’s examples are homely — teller machines, draught beer dispensers, pizza ovens — and its position is that PST applies “even when included in a purchase of real property”.
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Stock in trade is tangible personal property, so relief comes from the definitions. Section 1 defines a “retail sale” as one “to a purchaser for purposes of use or consumption and not for resale”. Goods bought to resell are not bought for use.
The seller cannot take that on trust. Section 37(3) makes a collector levy anyway “unless the collector obtains, at or before the time the tax is payable” the buyer’s registration number or a declaration acceptable to the director. And section 81, Tax if change in use of property acquired for resale, follows if goods taken exempt end up used in the business.
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The largest exemption on a manufacturing purchase sits in Part 5 of the regulation. Section 92(1)(a) exempts, in a manufacturer’s hands, “machinery or equipment obtained for use in British Columbia primarily and directly in the manufacture of qualifying tangible personal property”, with parallels for software, mining and logging.
It is not open to everyone with a machine. Section 115(2) excludes caterers, government bodies and restaurateurs preparing food for retail sale on the premises “unless the retail sales of those food products comprise less than 10%” of their total food sales. The ministry’s examples land on that line: a $100,000 restaurant with $85,000 of taxable kit bills $5,950 of PST; a $458,000 winery whose presses and tanks qualify bills $350.
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Part 9 of the regulation carries the exemptions a reorganisation relies on, and they are narrower than the corporate tests beside them. Section 148 treats corporations as related only where one is a wholly owned subsidiary of the other or both are subsidiaries of one parent — “at least 95% of the outstanding shares of each class of the share capital”.
Section 151 exempts a transfer to a corporation the transferor wholly owns and controls, but only if that lasts: it does not apply “unless the previous owner” of the property “continues to wholly own and control the corporation for a period of at least 8 months after the transfer date”. Section 152 instead requires consideration that “is the issue or transfer of shares in that corporation to the previous owner”, within 30 days and held eight months.
Both also require that tax was paid on the property once already. The ministry is blunt about the direction that gets nothing: “No exemptions apply when taxable assets are transferred from a corporation to an individual, including as part of a winding up, as a dividend in kind, or as a return of capital.” A share sale sidesteps all of this, since no tangible personal property passes.
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The seller usually collects, and section 179(2) is unforgiving: a collector must remit “amounts of tax levied under this Act by the collector, whether or not collected”. And the definition of “collector” takes in anyone required “to be registered under section 168 but who is not registered”.
The buyer is not off the hook if nobody charges. Section 189(2) says only that “the liability of a person who is required to pay the tax is satisfied if the tax is collected by the collector”. The ministry’s rule follows: “the purchaser must self-assess and remit the PST due on their next PST return”.
The larger exposure has nothing to do with the tax on this deal. Section 187, Certificate required for bulk transaction, catches “a disposition of substantially all of a collector’s tangible personal property or software in British Columbia”. Buy through one without a duplicate of the director’s certificate and “the person must pay to the government an amount equal to the total of all amounts owing under this Act, on the date of the bulk transaction, by the collector” — the seller’s whole PST account.
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Four things earn their place: an allocation schedule that survives a section 27 valuation; the buyer’s PST number or exemption certificate before closing; a clearance certificate as a condition, because the ministry’s position is that “If the purchaser does not obtain a clearance certificate, they are liable for an amount equal to any outstanding amount owed by the collector”; and a line for the tax in the funds flow. Note the ministry reads “substantially all” as “more than 90%” — a gloss, not a figure in the Act.
Budget for one more. Where the purchaser of legal services provided in British Columbia carries on business there, section 126(1) requires that “the purchaser must pay to the government tax on the provision of the legal services at the rate of 7% of the purchase price of the legal services”. The deal’s own legal bill is taxable.
This page is British Columbia and nothing else: every province settles its sales-tax position on its own terms, and none of the others is described here or should be inferred from it.
No. The section 167 going-concern election only removes the 5% GST. It has no effect on BC’s 7% PST, which is imposed under a separate provincial statute with no going-concern relief of its own, apart from a narrow exemption limited to custom software.
Not safely. BC’s Provincial Sales Tax Act gives the director a valuation power under section 27 to determine fair market value and deem it the purchase price, and the ministry has stated the parties cannot shift price onto goodwill just to avoid PST.
No. Affixed machinery used directly in production, storage, or handling is expressly included within the definition of tangible personal property, so it stays taxable even though it comes with the building; only true real property itself falls outside PST.
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