As an entrepreneur, paying your taxes can be intimidating. The instructions may seem complicated, and if you make a mistake you could face penalties, interest charges, or an audit.
But it’s important for business owners to understand the different provincial tax rates where they live. We’re going to go over what you need to know about sales tax, corporate tax, and personal income tax in B.C. in an easy-to-understand way.
This should help you manage your taxes in B.C. with confidence, take full advantage of tax credits, and remove some of the stress from tax time.
Sales tax in B.C.
If you sell taxable goods or services in B.C., you need to collect the Provincial Sales Tax (PST) when you make a sale. The sales tax in B.C. is 7 per cent.
There are a few products, such as liquor, that are taxed at different rates, but other than those exceptions, the rate is the same for all sales.
To learn more about how sales tax works in each province, read this Small Business Guide to Canadian Sales Tax Rates.
Does your business need to collect PST in British Columbia?
As a simple guideline: if your business sells goods in B.C., you most likely need to charge PST. On the other hand, if you’re selling a service, it’s probably exempt.
With that being said, there are a few important exceptions to that rule. For example, legal services and “services to goods” such as computer repair and vehicle maintenance are taxable. To help you figure out which sales you’ll need to collect tax on, here are some examples of what’s taxable and what’s exempt from sales taxes in B.C.
Taxable goods and services in B.C.
Some of the goods and services PST applies to:
- The purchase or lease of new and used goods in B.C.
- Goods brought, sent, or delivered into B.C. for use in B.C.
- The purchase of:
- Services to goods such as vehicle maintenance, furniture assembly, computer repair
- Legal services
- Telecommunication services, including internet services and certain digital and electronic media content such as music and movies
Tax-exempt goods and services
Here are some goods and services that are exempt from sales taxes in B.C.:
- Professional services (other than legal services)
- Sales and rentals of real property
- Transportation fares (e.g. bus, train, ferry, airline)
- Food for human consumption (e.g. basic groceries and prepared food such as restaurant meals)
- Books, newspapers and magazines
- Children-sized clothing
- Prescription medications and household medical aids such as cough syrup and pain medications
Register to collect PST in British Columbia
If your business provides taxable goods or services, and you haven’t already done so, you’ll need to register to collect PST. The easiest way to do that is through the eTaxBC online service, where you’ll need to provide some basic details about your business.
Once you’re registered, you can also use eTaxBC to file and pay the PST you collect.
Corporate taxes in B.C.
If your business is a corporation rather than a sole proprietorship, you’ll need to pay corporate tax.
In some ways, corporate taxes in B.C. are simpler to understand than personal income tax. For example, as opposed to having many different tax brackets, provinces and territories generally tax corporations at just two different rates.
There’s a lower rate for small businesses with income up to a certain threshold, and a higher rate that applies to all other income. In B.C., the lower rate is 2 per cent, and the higher rate is 12 per cent.
The current threshold for the lower rate in B.C. is an income of $500,000. That means business income up to $500,000 is taxed at 2 per cent, and income above that amount is charged at 12 per cent.
Example tax calculation
For example, a company that made $650,000 in 2020 would pay the following corporate tax:
$500,000 taxed at 2% = 10,000
$150,000 taxed at 12% = 18,000
Total = $28,000
How to pay corporate taxes in B.C.
To file and pay corporate taxes, you’ll need to fill out a T2 Corporation Income Tax Return and provide it to the CRA. One way is to file online, and corporations with revenues over $1 million are typically required to do so. If you prefer to file by paper, businesses located in B.C. can send their returns to:
Prince Edward Island Tax Centre
275 Pope Road
Summerside PE C1N 6A2