PST on what your BC restaurant buys: equipment, repairs, software and self-assessment

Owners focus on the tax they collect from guests and forget the tax they pay on the way in. In British Columbia, the PST on what your restaurant buys is a real cost, because there is no input tax credit to recover it. Knowing what is taxable helps you budget a fit-out, and avoids a bill after an audit.

Why is PST a cost to the business?

The Ministry of Finance is direct about it: unlike GST/HST, there are no PST input tax credits on goods purchased by a business. PST is payable on goods unless an exemption applies, for example goods bought for resale. When you buy a taxable item to use in your restaurant, you are the end user, and you are responsible for the tax. The general rate is 7 percent.

What do restaurants typically pay PST on?

The Ministry's small business guide lists examples of taxable business assets and supplies that include:

• business equipment and supplies, such as shop equipment and cleaning supplies
• office equipment, such as desks, chairs and cash registers
• office supplies, such as receipt books, stationery and till tape
• advertising flyers
• affixed machinery, already fixed to or installed in a building
• heat, other than electricity, for business use
• furniture and appliances, and computers

Software is taxable, and so are telecommunication services such as phone and internet for use in your business. Most services provided to taxable goods are taxable as well, for example maintenance and repair of your equipment.

What is a related service?

A service to, or to install, taxable goods. The guide's example is that you are responsible for paying PST on services provided to maintain and repair equipment you use in your business. A repair to your dishwasher or fryer therefore carries PST on the labour. Bulletin PST 301 on related services covers the details.

What if the supplier does not charge PST?

You must self-assess, which means pay the tax directly. If you have a PST number, you do that on your next PST return. If you do not, you file a Casual Remittance Return (form FIN 405) and pay on or before the last day of the month after the month you bought the goods. The Ministry's example is goods bought in June, with the return and payment due 31 July. An out-of-province supplier such as an online equipment seller often does not charge BC PST, so this comes up more than you expect.

What about goods from outside BC?

PST applies to taxable goods you buy or lease for business use from out-of-province suppliers. If the seller does not charge it, you self-assess on the total you pay to bring the goods into BC, including transportation, customs and excise, but not the GST. Bulletin PST 310 explains it.

What about promotional items and gifts?

PST applies when you take taxable goods from your resale inventory for your own use, or you buy taxable goods to donate, to give away as promotional material, or as samples, gifts and prizes. A branded tote bag given to regulars is a promotional item. A case of soft drinks given to a charity event is a donation of taxable goods. Bulletins PST 311 and 312 cover these.

What happens when you buy or sell a restaurant?

When you buy a business, PST applies to all taxable business assets. If the seller is a PST collector, it must collect on the sale of taxable assets. If it does not, you self-assess. You can ask the Ministry for a clearance certificate, which confirms the current owner has paid and remitted all outstanding PST up to the date of issue. Without one, you must pay an amount equal to all amounts owing at the time of purchase.

A practical routine

1. Ask each supplier whether PST is on the invoice.
2. Keep a list of items from out-of-province suppliers.
3. Self-assess monthly with the Casual Remittance Return if you are not registered.
4. Keep all purchase records for five years.
5. Budget 7 percent on taxable equipment in any fit-out plan.

For registration, see registering for GST and PST. For what you charge guests, read GST, PST and liquor tax on restaurant sales. If you take orders through a delivery platform, the platform's fees carry PST too: see PST and online marketplace facilitators.

More in the Canadian guides for food businesses.