B.C. lawyers have two weeks to sort out sales tax changes

Lawyers subject to British Columbia’s provincial sales tax have just two weeks to get ready to go back to the old levy.

“They haven’t given people a lot of time,” says Cyndee Todgham Cherniak, a lawyer at Toronto international trade and sales tax boutique LexSage Professional Corp. who runs the HST blog.

In fact, the government issued a revised bulletin on registering for the PST a couple of weeks ago, meaning lawyers will have to act quickly to get ready for the new regime that comes into effect April 1. They’ll have to register for the PST before then, according to the Law Society of British Columbia.

There are two areas that will affect lawyers. First, they’ll have to return to collecting PST and the goods and services tax separately following the demise of the harmonized sales tax that B.C. residents rejected in a 2011 referendum. Second, they’ll no longer be able to claim input credits for the seven-per-cent PST they pay on items they buy for their business.

“I think it will be more expensive to operate a law firm,” says Todgham Cherniak, who notes the precise impact will depend on how law firms spend their money.

In addition, there are other complications that could affect lawyers across the country. While some might have expected that returning to the PST was simply a question of going back to how things existed prior to the HST, the B.C. government has in fact changed some of the rules.

For example, the rules indicate a lawyer outside the province who provides legal services to a B.C. resident will have to register for and collect PST. According to Todgham Cherniak, that’s a change from the previous regime and is an area that will be “hotly debated.” The change will bring in more revenue, she notes, but she adds it’s not clear the province has the authority under the Constitution Act to expand the tax in that way.

“It’s a matter of who is caught in the net by the broadness of the rules,” she says.

With some firms outside the province doing a lot of business with companies such as B.C. mining firms, the issue could be significant. In addition, out-of-province lawyers providing minimal services on a one-time basis might not register for the tax or realize they have to. Of course, it’s not necessarily likely that B.C. tax authorities would be aware of such transactions.

It appears, then, that going back to the future isn’t so straightforward.

“I’m glad that I’m not at a law firm in B.C.,” says Todgham Cherniak.

For more information: The government's Provincial Sales Tax Regulation; the Provincial Sales Tax Exemption and Refund Regulation; the Provincial Sales Tax Notice for legal services; and the Provincial Sales Tax Act. Lawyers with a specific question can contact Law Society of B.C. practice adviser Dave Bilinsky .

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