In March, the Saskatchewan government delivered its 2017 Provincial Budget which increased the rate of Provincial Sales Tax (PST) from 5% to 6%. However, more importantly there was a fundamental change in the way Saskatchewan PST will apply to services related to real property.
Effective April 1, 2017, the PST applies to services to real property. Taxable services include construction, alteration, repair, erection, remodeling, improvement, or any other service in relation to real property, a building or other structure on real property, whereby the value or use of the real property is improved. Some maintenance services such as snow clearing and lawn care remain exempt from PST.
Primary changes to Saskatchewan PST for real property services
The primary changes regarding the application of Saskatchewan PST to real property services are:
- Contractors performing services to real property are now licensed as vendors rather than consumers.
- Contractors are required to collect PST on the total charge to construct, alter, repair, erect, remodel or improve real property. Effective April 1, 2017, these charges, which were previously exempt from PST, become taxable and PST must be shown as a separate line item on the invoice to the customer.
- Contractors will purchase materials exempt from PST and collect the tax from their customer on the total contract, rather than paying PST on the cost of the materials.
- Contractors building residential or commercial premises for resale must collect PST on the retail selling price of the premises, excluding the value of the land.
What should you do as a contractor or a property owner?
Contractors should discuss with their advisors if they have questions about how they should be implementing changes to their invoicing, and collecting and remittances of PST, and so on.
If you are a property owner, be aware that you’ll now be seeing these line items on your invoices from contractors.
At this time the Saskatchewan Ministry officials are working on getting more details out to the public. Stay tuned for more updates.
Post Updated April 7, 2017: The Saskatchewan government has released an information notice on the PST changes on services to real property. For details, see: http://www.publications.gov.sk.ca/details.cfm?p=084698
Scott Merry, CPA, CGA
Partner, Indirect Tax