RCC remarks to B.C. Finance Committee on Online Marketplace Services Tax: June 17, 2022June 21, 2022
B.C. retail sales appear to be recovering after a very difficult few years, although the industry continues to be impacted by supply chain issues, severe labour shortages and violence impacting our customers and employees. B.C.’s economic future is dependent on its ability to attract and retain talented people to live and work in our province. Because of this, we are asking why government would, perhaps inadvertently, choose to damage the economic prospects of B.C. businesses.
We strongly applaud government’s effort to provide equity in Bill 6, the Budget Measures Implementation Act, by obligating online marketplaces to collect Provincial Sales Tax. We have long held that eCommerce transactions should be obligated in the same way as brick and mortar stores, so as to provide a level playing field in B.C.
While government has rightly moved to close loopholes for PST collection relating to sales of goods, it has also added PST to a new service – “online marketplace services.” The online marketplace services tax seems to be contrary to the main thrust of tax equity and appears to be an entirely new tax. More problematic still, two aspects of this new tax will significantly disadvantage B.C. businesses. Our primary ask is that these inequities be corrected as soon as possible.
Even if the government disagrees with us and is determined to tax online marketplace services for the first time, it needs to apply the same principles of equity as taxing the sale of goods. What B.C. has done, we believe unintentionally, is to create obstacles and disadvantages for B.C. businesses.
First, online marketplace sellers based in B.C. will face taxes not faced by their competitors based elsewhere. If a small retailer in Prince Rupert chooses to sell its goods on an online marketplace and the end-purchaser is located in B.C., the Prince Rupert business would be taxed on online services received from the marketplace. A retailer located outside BC would not be taxed on a similar transaction. This additional cost will, in turn, raise the retailer’s prices versus competitors based elsewhere. We can think of no good reason that B.C. would want to disadvantage B.C.-based sellers, typically small businesses. Hence, we question the need to bring in this new tax that seems likely to harm local businesses that are making the move to online sales in order to stay competitive.
The solution is to either remove (the new) section 134.3 from the Provincial Sales Tax Act, or to rewrite it so that all online marketplace services, whether in B.C. or not, are charging taxes on services only on the portion of services applicable to purchases of products in B.C.
Second, online marketplaces must collect PST on all their online marketplace services provided in B.C. These services include advertising, warehousing, customer service, fulfilling orders or bookings, and other services to facilitate an online marketplace seller’s sale of goods, software, or other taxable services through the online marketplace. This means that B.C.-based businesses are faced with a tax that their competitors elsewhere will not incur. This provision can only result in those services and associated jobs being relocated elsewhere – and serves as a strong disincentive for new job creation, particularly at a time when there are forecasts of a major downturn for tech companies. We strongly urge the committee to recommend the removal section 134.3 sub-section (1) of the Provincial Sales Tax Act to provide a level-playing field for businesses and workers based in B.C.
Particularly given the extremely short time period, 29 days, between June 2, when Bill 6 received royal assent, and the implementation date of July 1, our advice is to pause implementation of the “online marketplace services” provisions until government can ensure that the amendments result in the intended outcome rather than increased inequity and negative consequences for jobs, growth – and we believe even for future PST revenue.
In any alternative, the government must at minimum consider providing the standard OECD adjustment period of at least 12 months for a new tax.
Non-resident eCommerce entities continue to get another advantage from government. Those who sell into British Columbia, until July 1 without charging or remitting the PST, also charge and pay no eco-fees on products and packaging obligated under the Environmental Management Act, yet the packaging and products are discarded into our recycling system. RCC asks government to correct this imbalance as well through an amendment to the Environmental Management Act or the Recycling Regulation (under the Environmental Management Act) with language similar to the Provincial Sales Tax requirements of online marketplace sellers for Provincial Sales Tax on goods.
RCC thanks the Members of the Committee for their interest in the views of the hundreds of thousands of British Columbians who work in retail businesses across B.C. We urge government to ensure that our resident businesses are not unfairly disadvantaged in comparison to those located outside of our province and country, which is clearly to the detriment of B.C. workers, B.C. jobs, and our province’s economy. Please do not hesitate to be in touch with any questions or comments regarding our submission.
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Senior Manager, Government Relations and Regulatory Affairs