Most businesses know (or soon find out) when they bring their own property into a PST province on a temporary use basis to carry out a contract they will owe a pro-rata amount of PST.
In Saskatchewan, we have two options in applying PST on temporary use:
- Pay the full amount of PST on a depreciated value, or;
- Defer the PST by remitting monthly or annually, but based on the original cost.
Temporary Use Rules and What They Target
In general, the temporary use rules are targeted at “equipment, vehicles and tools” that are brought into Saskatchewan on this basis. This is fairly broad wording and, on the surface, this appears fairly straight forward…or is it?
A non-resident brings with them their equipment, corporate vehicles, and tools needed to do the contracted work. We generally think of heavy equipment like a loader, skid steer, dump truck and the like. We think of the corporate trucks or cars owned by the business and the hammers and screwdrivers, and such being used. Yes, by the way, the PST liability is most often overlooked.
For a number of years, as practitioners, we have pondered how detailed the authorities would go with this. Have a read of the newly updated Information Bulletin PST-38. Their administrative policy is being expanded, but lacks clarity as to what is actually subject to PST.
The renewed target→ employee-owned (personal) vehicles
The authorities are expecting PST to be self-assessed on all the reimbursed charges paid to the employees for use of their personal vehicles being used in the performance of the contract. This application will not be required if the personal vehicle is not being used in performance of the contract. The difference in reasoning is not obvious, nor is it obvious the amount of PST that will be generated using a more granular application.
Calculating the Provincial Sales Tax
Essentially, an employer should calculate PST on the reimbursed costs in relation to the Saskatchewan component of the trip(s). Most reimbursements are done on a per-kilometre rate plus actual fuel costs. Fuel acquired in Saskatchewan is not subject to PST and should not trigger a PST self-assessment on the ‘imported’ fuel. Many times an employer will not allow an employee to use their own personal vehicle for business use. In other words, this could be a lot to do about nothing.
If we assume a round trip of 2,000 kms, with 1,200 kms of the trip being incurred in Saskatchewan under these requirements, we calculate PST of $30 being triggered when we use a $0.50 per km reimbursement rate. Interestingly, this calculation is not prescribed in regulation for the temporary use rules.
Does this policy open the door to a lot of large expensive vehicles entering the province under the ownership of employees and not the business itself? A reimbursement basis versus a temporary use application would appear to trigger less PST.
To bring further awareness to the temporary use requirements, consider how many times businesses have sent in employees from another province to perform contracts. They brought their laptop or tablet with them, their cell phone, and other equipment. Yes, PST is due on this temporary use property. Hopefully, the application is targeted to the bigger ticket items to outweigh the costs of calculating $30 or $50 here and there.
Are You Compliant?
If you are not aware of the above changes, you may find yourself in a position of non-compliance in respect of your business activities in Saskatchewan. The Saskatchewan Provincial Sales Tax regime can be complex and at times confusing if one is not fully apprised of its intricacies.
MNP has an experienced group of Indirect Tax Specialists to assist you with your questions and concerns. Should you require assistance, please contact a member of our Indirect Tax Team for assistance.
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