The British Columbia (“BC”) Budget and Fiscal Plan 2022 (“BC Budget 2022”), presented on February 22, 2022, expands the province’s sales tax reach into digital markets. In addition to requiring “online marketplace facilitators” to register for, collect and remit BC Provincial Sales Tax (“BC PST”) for sales made though their online platforms, online marketplace facilitators will be newly required to charge BC PST on the “online marketplace services” they provide to “online marketplace sellers”. The proposed tax specifically on “online marketplace services”, which includes advertising or promoting and listing sale of goods, software or sale of taxable services, is a first of its kind in Canada. The proposed changes are scheduled to take effect July 1, 2022.

The proposed requirements for online marketplace facilitators to register for, collect and remit BC PST were notably absent from BC Budget 2021, which introduced new requirements for certain out-of-province sellers to register for BC PST. Around that time last year, other Canadian jurisdictions had already imposed or were proposing registration requirements on online marketplace facilitators, in addition to certain out-of-province sellers.

Under the proposed legislation, an online marketplace facilitator will include any person that operates an online marketplace and facilitates the provision or retail sale or lease of goods, software, or taxable services provided they also collect payment in respect of such provision, sale or lease. Similar to existing registration requirements for non-resident sellers, an online marketplace facilitator will not be required to register if they are under the threshold of $10,000 of facilitated revenues in the preceding 12 months or $10,000 of reasonably estimated facilitated revenues for the next 12 months. Additionally, if an online marketplace is jointly operated, owned or controlled by two or more online marketplace facilitators, only one will need to register for, levy and collect the BC PST.

In the case of goods sold through an online marketplace, the draft legislation currently only contemplates facilitators registering for, collecting and remitting BC PST if the goods originate in Canada when sold, provided or leased. However, BC Budget 2022 indicates the intention to expand these collection obligations to sales of goods shipped from outside Canada at some point in the future. It is also worth noting that the existing definition of “taxable services” in the Provincial Sales Tax Act, SBC 2012, c 35 includes “accommodation”, so a separate definition for “online accommodation platform” is no longer needed and is being repealed.

While BC is joining other Canadian jurisdictions in requiring marketplace facilitators to register, the proposal to levy BC PST on “online marketplace services” is new. In fact, this tax is notably contrary to the GST/HST treatment of services provided by facilitators in certain similar circumstances. For GST/HST, the facilitator is sometimes deemed not to have made a supply to unregistered sellers such that the seller does not incur non-recoverable tax!

The proposed tax for online marketplace services will only apply if the service is provided by an online marketplace facilitator (or by certain other persons with a relationship to the online marketplace facilitator, such as an agent) to an online marketplace seller. However, there are many types of services that may be taxed, such as the listing of goods, software or taxable services for sale, advertising or promotion services, storage services, or, in general, any “other services to facilitate an online marketplace seller’s sale, provision, or lease” of goods, software, or taxable services through an online marketplace. Similar to the existing Provincial Sales Tax Act, the purchase of online marketplace services will be exempt from BC PST if purchased solely for the purpose of selling or providing the service to other persons that use the online marketplace service.

Given BC’s suggestion that it will later expand the registration requirements to include sales of goods shipped from outside Canada, it is clear that BC is not finished its tax push into digital markets.