PST for BC contractors: who pays it on materials
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The contractor pays PST on the taxable goods used in the job and does not charge it to the customer, unless a written agreement says the customer pays.
Short answer: a contractor who supplies and installs goods that become part of real property in BC pays PST on the taxable goods used to do the contract, whether it is a lump sum or a time-and-materials contract, and does not charge the customer PST on them. The exception is a written agreement in which the customer is liable for the PST, and then the contractor has to be registered to collect PST and charge it. A business gets no PST input tax credit.
The standard rule
The contractor pays PST on the taxable goods acquired to fulfil a real property contract, unless a specific exemption applies. That covers materials used to build a structure attached to land, such as lumber, concrete and windows. The contractor then does not charge PST to the customer on those goods.
When the customer agrees to pay
A contractor is not required to pay PST on goods for a contract if all of these hold:
- The goods will become part of real property in BC.
- The contractor and the customer have agreed that the customer is liable for paying PST.
- There is qualifying evidence of the agreement, such as a signed agreement that sets out the purchase price of the goods and states that the customer is liable for the PST.
To rely on this the contractor must be registered to collect PST before supplying the goods, charge the customer PST on the greater of the contractor’s purchase price and the price in the agreement, and remit that PST.
No credit for PST paid
GST registrants can claim input tax credits for the GST they pay. PST works differently, and a business gets no PST input tax credit for goods bought. A fictional example: a contractor buys CAD 10,000 of taxable materials and pays 7% PST, CAD 700, as part of the cost of the job. The GST on the same purchase can be claimed back by a registrant. The PST cannot. The figures are invented.
What your books need to show
- Receipts that show PST paid on materials for each job, so the cost of each job includes it.
- Which jobs, if any, run under a signed agreement where the customer pays PST, with the agreement filed.
- Whether you are registered to collect PST, which matters for that agreement and for any goods you sell separately.
Do I charge my customer PST on materials?
Under the standard rule, no. The contractor pays PST on the goods and does not charge the customer for them.
Does it matter whether the contract is lump sum or time and materials?
No. The contractor pays PST on the taxable goods in either case.
Can the customer pay the PST instead?
Yes, under a written agreement that meets the province’s conditions, and the contractor must be registered to collect PST and charge it.
Can I claim the PST back like GST?
No. A business gets no PST input tax credit for goods purchased.
GST and PST in BC, side by side →
Registering for PST in British Columbia →
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