Leveling the Playing Field Between B.C. and Out-of-Province Contractors When Bidding on B.C.-Based Projects - Education and Enforcement
Chambers welcome reputable businesses, regardless of where their office base is located. We believe competition is good for both businesses and customers, spark creativity, and increase levels of service.
Education, and sometimes enforcement, is needed to ensure out of province companies are aware and follow B.C.’s labour laws, Highway & Transportation regulations, WorkSafeBC requirements, and tax laws - by creating educational opportunities, increased auditing, and enforcement of legislation.
When out of province’s companies have more favourable labour laws, taxes, & premiums in their home province, it’s hard for B.C. companies to have a successful bid against theirs when comparing quotes based on dollars.
We recommend that the B.C. government consider mirroring portions of Saskatchewan’s Provincial Sales Tax Act in relation to non-resident contractors. We are informed by those representing industry that there is a concern that non-resident businesses are not properly self-assessing taxes under B.C.’s 1/3 tax formula (PST due = 1/3 x [(PST rate x depreciated purchase price) – B.C. tax previously paid] or paying equivalent B.C. premiums. PST in B.C. is due under the 1/3 formula or the 1/36 formula each time the equipment is brought into the province until the full tax has been paid. If goods are temporarily brought into B.C. for less than 6 days, no PST is due.
However, if the goods are brought in for permanent use, then the person must pay PST on the greater of 50% of the purchase price and the depreciate purchase price. Vehicles are depreciated in B.C. at the rate of 30% per year and equipment is depreciated at a rate of 20% year. If the equipment brought into B.C. is leased, then the person is required to pay PST based on the number of hours the equipment is in B.C. Where PST is owing, the person must pay the tax directly to government (self-assessing).
According to our understanding of Saskatchewan’s Provincial Sales Tax Act, all non-resident contractors, including those who operate in the petroleum industry, are required to register with the Revenue Division for the purpose of reporting tax payable on materials, supplies, equipment, vehicles and tools used in Saskatchewan. Non-resident contractors may be required to obtain a clearance letter upon completion of their Saskatchewan contracts.
A non-resident contractor, including non-resident petroleum contractors, who brings equipment, vehicles and tools into Saskatchewan is required to pay PST on taxable equipment imported into the province for own use on either the depreciated cost of the equipment or on a temporary use method.
Tax must be paid on all equipment and consumables used in activities that are not directly related to exploration, drilling, testing and down-hole servicing including:
- pipeline inspection, laying and servicing;
- hauling goods and to convey personnel;
- collection and/or disposal of waste products;
- safety and environmental monitoring and testing;
- accommodation and other personnel facilities;
- storage and repair;
- road building and maintenance;
- snow removal;
- firefighting and fire prevention; and
- production and extraction
Tax is payable on the following at the time of purchase or upon entry into Saskatchewan:
- passenger vehicles, unmounted trucks and tractors and trailers including power units and bulk transport trailers used to transport equipment or other goods into the province;
- swabbing units used for production (in place of a pump jack);
- spool trucks used to string electrical wire down-hole;
- temporary storage and repair facilities • equipment used for inspecting and servicing drill stem;
- core vans (portable lab) used to examine core samples;
- perforation charges, swab cups and bridge plugs;
- well site-trailers and shop trailers;
- front-end loaders • water trucks, welding trucks, winch trucks;
- pressurizing, depressurizing and vacuum units trucks used primarily for disposal services;
- hauling equipment, including waste disposal;
- firefighting equipment, safety clothing and safety equipment;
- steam injection equipment including water storage tanks, water treatment equipment, pumps and boiler packages, fire ignition unit, light plant, injection lines and portable enclosure;
- maintenance tools including welders, welding supplies, pipe cutters, grinders and hoists; and
- any other equipment that does not qualify for the remission of tax outlined in the Order-in-Council 1436/67.
Leased or rented vehicles, equipment and tools brought into Saskatchewan are subject to tax on the total daily, weekly, monthly or yearly lease/rental charges, including financing, freight, maintenance charges etc., with no pro-ration allowed. For vehicles, equipment and tools leased or rented in Saskatchewan, the PST must be paid to the vendor at the time of lease/rental. In B.C., a business is required to pay tax on the equipment, but they pay tax based on the number of hours the rental equipment is in B.C.
Company owned vehicles and vehicles plated personally by owners and directors of the company are subject to the methods outlined in the Act. Businesses are required to self-assess PST on reimbursement charges paid to employees for use of their vehicles in the following circumstance:
- a non-resident employee brings their personal vehicle into Saskatchewan;
- the vehicle is utilized in the performance of the contract (other than for personal transportation to the job site); and
- the business reimburses the employee by some method. Note: Vehicles registered inter-jurisdictionally for the transportation of goods or passengers will be subject to the Prorated Vehicle Tax at the time of registration and not the methods outlined above.
Resident contractors who ship equipment or component parts outside of the province for repairs that are not eligible for the remission are required to self-assess PST on the repair parts and labour. Freight charges in and out of the province are not subject to tax. Non-resident contractors who ship equipment or component parts outside of the province for repairs during a job are required to self-assess PST on the repair parts and labour unless the repairs qualify for the remission and are capitalized. Any related freight charges in and out of the province are not subject to tax. Repair parts and labour provided to non-resident equipment and component parts that are removed from the province for repair services between jobs are not subject to tax.
Under Section 29 of The Provincial Sales Tax Act, a non-resident contractor working in Saskatchewan is required to post a Guarantee Bond or cash deposit in an amount equivalent to 5% of the total contract amount. It is the duty of the general contractor or principal to ensure that the non-resident contractor complies with this provision. Failure to do so can leave the general contractor or principal liable for any taxes which the non-resident contractor fails to remit. In order to help meet this requirement, it is common practice to maintain a holdback of 5% until a contract clearance is obtained.
Before final payment is made on a contract, the subcontractor must obtain a clearance letter from the Revenue Division and provide a copy of the letter to the general contractor principal.
Saskatchewan fuel tax must be paid on all purchases or imports of gasoline and diesel fuel, except where specifically exempt under the Fuel Tax Act, 2000. No exemption is available in Saskatchewan for off-road use of these fuel products.
Of special interest, general contractors, subcontractors and principals must provide Saskatchewan’s Revenue Division with the following information on all subcontracts which are awarded by them: the name & address of each subcontractor; the nature of each subcontract; the value of each subcontract and who is responsible for the tax; and the proposed date of commencement and completion of each subcontract.
It is the duty of the general contractor or principal to ensure that the non-resident contractor complies with the above mentioned provision. Failure to do so can leave the general contractor or principal liable for any taxes which the non-resident contractor fails to remit.
Non-resident contractors are required to become registered as a consumer and pay tax on equipment used in carrying out their contracts in Saskatchewan. Tax is payable on the contractor’s cost of all materials and supplies used to complete each contract. Formulas are used to calculate the pro-rata amount of tax owing on equipment.
Provincial Sales Tax bulletins, forms and information are available on the Internet at: http://www.finance.gov.sk.ca/taxes/pst
See PST-38, Information for Non-Resident Real Property and Service Contractors for further details at www.finance.gov.sk.ca › ... › Programs & Services › Provincial Sales Tax -http://www.finance.gov.sk.ca/revenue/pst/bulletins/PST-38%20Non%20Resident%20Contractors.pdf
And see PST-13, Information for PETROLEUM DRILLING & WELL SERVICING CONTRACTORS at http://www.finance.gov.sk.ca/revenue/pst/bulletins/PST-13.pdf
THE CHAMBER RECOMMENDS
That the Provincial Government:
Protect British Columbia companies’ ability to compete on bids by creating a level playing field when bidding on contracts. Conduct a full and comprehensive analysis of Saskatchewan’s tax laws in relation to non-resident contractors/businesses in comparison to British Columbia’s tax laws to tighten loop holes and ensure B.C. businesses are submitting their base costs at the same level as non-resident contractors;
Fully staff a field audit branch in communities close to bordering provinces;
Monitor, track and publicly report the taxes collected from non-resident contractors, putting the majority of these funds back into education and enforcement programs;
Require all non-resident contractors coming to work in B.C., including those who operate in the petroleum industry, to register with the Ministry of Finance for the purpose of reporting tax payable on materials, supplies, equipment, vehicles and tools used in British Columbia. Non-resident contractors to be required to obtain a Clearance Letter upon completion of their British Columbia contracts and provide it to the General Contractor or Principal prior to a hold back payment on contract being made. Provide proof of WorkSafeBC coverage, if necessary;
Require General Contractors or Principal to ensure non-resident contractors comply with BC tax and labour laws, or possibly be held liable for non-compliance;
Require Ministry of Finance to be responsible for providing Clearance Letters to sub-contractors, for the purpose of providing to General Contractor or Principal as proof of non-resident contractor’s compliance;
Require General Contractor or Principal to identify/report to the Ministry of Finance their sub-contractors for the purpose of compliance and audit checks; and
Develop educational opportunities to raise awareness to non-resident contractors to educate as to what our B.C. tax and labour laws are. Encourage a better understanding through an information campaign through industry associations and government offices.