If you're a British Columbia based ecommerce seller, BC introduced new PST collection rules which will likely significantly impact the profitability and viability of your company.

On July 1, BC introduced sales tax changes which will see British Columbia charge PST to online marketplace sellers on their global marketplace facilitator fees. What exact does this mean? 

For a $1million seller operating on a marketplace such as Amazon, Etsy, or eBay it will result in an additional $10,500 in taxes paid by your company. Here's exactly how:

Imagine you are an ecommerce seller with $1,000,000 in annual revenue with 100% of your sales occurring on Amazon. Also imagine that 90% of your sales occur within the United States and 10% in Canada. You will pay approximately $150,000 (15%) in Amazon seller fees in both the United States and Canada. British Columbia as of July 1 will charge 7% on that entire $150,000 or $10,500 NOT just the portion of sales that occurred in Canada or British Columbia. This amount will be paid entirely by sellers and will not be recoverable as an input credit as most GST paid is.

Why are these new PST rules flawed? Here's why:

• PST collection will only apply to British Columbia based sellers. On the largest marketplace in Canada, Amazon.ca, Chinese sellers make up roughly 60% of all third party sellers, American sellers are approximately 25%, while Canadian sellers make up less than 20% of all sellers. Canadian sellers are already at a significant disadvantage to international based sellers  and this law further hurts Canadian sellers, especially British Columbia based sellers.
• Sales tax collection on global marketplace facilitator fees for a seller strictly based on their official company location is nearly unheard of in North America and puts British Columbia sellers at an unfair advantage relative to both other Canadian sellers and, worse, other global sellers. 
• PST, unlike GST/HST is not a recoverable input credit. These new rules put British Columbia based sellers at a considerable disadvantage relative to other Canadian sellers, especially those in provinces with harmonized sales tax collection system.

With these impacts considered, we suggest one simple revision to the July 1, 2022 PST collection rules:

• PST should be applied only to marketplace facilitator fees occurring on sales to British Columbians and NOT on global sales

Ecommerce is one of the fastest growing industries in both the country and the province. This hastily thought out change will disincentivize ecommerce companies, both small and large, to operate out of British Columbia.