Canada: Sales tax changes target digital products and services (British Columbia)
Changes apply retroactively to 2013 and broaden certain definitions under the provincial sales tax rules
Recent changes—essentially guaranteeing that the British Columbia (B.C.) provincial sales tax (PST) applies to a broad range of products and services delivered electronically—may affect businesses that buy or sell software and cloud computing services.
These changes apply retroactively to 2013 and broaden certain definitions under the PST rules, specifically addressing the B.C. Supreme Court’s comments in a recent 2023 decision that found that certain specific cloud computing services and online chat technical support services were not subject to PST. The new rules also feature new non-compliance penalties, including for third-party providers.
KPMG observation
Although the changes were expected, software and cloud computing businesses may be surprised to see the extensive scope of B.C.'s new rules, especially given their retroactive application. Businesses that may have applied the previous PST legislation to determine the tax status of some of their digital products and services need to review these changes to understand how they may affect their position on cloud services or other digital products. In particular, these businesses, including suppliers and purchasers, will have to determine whether they may face a tax liability for past years now that these changes are enacted.
Read a May 2024 report prepared by the KPMG member firm in Canada