When it comes to provincial sales tax (PST), every Canadian businessperson who sells or leases taxable goods or provides taxable services is a poorly paid tax collector. That is, unless you live in Alberta where there is no PST. Provincial governments take your job as tax collector very seriously, and here's why. There is a great deal of money in it.
Because these taxes are such a large portion of provincial revenues, it is not unusual for the province to pursue retail sales tax audits, and pursue them quite aggressively. All FBC services are structured to avoid audits if at all possible; however, FBC will represent its Members if such an audit should arise.
Here is what you can expect if you are selected for a retail sales tax audit.
The auditor may ask you to supply Purchase Exemption Certificates provided by customers to support sales where sales tax has not been collected.
- The auditor will write or call to set a mutually convenient appointment. Contact FBC immediately to arrange for us to attend the session with you.
- The auditor will tell you what documents to have on hand. Records subject to audit could include sales invoices, bills of sale, cash register tapes, purchase invoices, books of account, purchase records, financial statements, and income tax returns.
- The audit period is usually four years, but it can be longer at the discretion of the auditor.
- The auditor will begin with an interview to gather information on the nature of your business operation, the type of accounting system you use, and how sales tax is handled on sales and purchases.
- The auditor may tour your business premises before reviewing the accounting records.
- Various tests will be conducted to ensure sales tax has been correctly collected or paid on taxable goods and services.
- A more in-depth review may be done if the auditor believes you owe sales tax.
- The auditor will advise you if there are any areas where sales tax has been overpaid.
If the auditor thinks a revised assessment is justified, he/she will discuss a potential assessment with you. If you disagree with this assessment and cannot resolve it with the auditor, you will be able to discuss the issue further with the auditor's manager by phone. Of course, FBC will be part of these discussions.
If the assessment is deemed necessary after all discussions, an official Notice of Assessment will be sent to you. You have the right to file a Notice of Objection with the Ministry's tax appeal branch. In some provinces, you have up to 180 days to file your Notice of Objection by registered mail.
In some provinces, more specifically Ontario, the Federal government now has the responsibility to administer the new Harmonized Sales Tax (HST), effective July 2010. While BC also transferred their authority to collect HST to the Federal government in July 2010, on August 26, 2011 the BC government announced its commitment to reinstate the old PST/GST regime, effective April 2013.
Each province makes the seller responsible for collecting and remitting PST. If you are unsure of your obligation or have questions about PST, please call our office.