Consumer Taxation Branch

BULLETIN

Province of British Columbia

Ministry of Finance and Corporate Relations

Revenue Division

Parliament Buildings

Victoria BC

V8V 2L9

Changes to Legislation Administered
by the Consumer Taxation Branch

On March 28, 1995, the Minister of Finance and Corporate Relations announced the following amendments to the Social Service Tax Act and the Motor Fuel Tax Act. These changes are effective March 29, 1995, unless otherwise indicated. Additional information may be obtained from any Consumer Taxation Branch office listed at the end of this bulletin.

Social Service Tax Act

The list of materials and equipment that may be purchased or leased exempt from social service tax by bona fide farmers for a farm purpose is expanded to include the following.

Effective March 29, 1995:

• Artificial lighting systems used in greenhouse operations to promote plant growth, including replacement bulbs for such lighting systems.

• Crop protection netting systems that enclose a crop to protect it from predators.

• Thermal curtains used in greenhouse operations to retain heat.

Effective June 1, 1995:
• Electricity.

• Natural gas, propane and fuel oil, except when used in an internal combustion engine or to propel a motor vehicle.

A bona fide farmer means a person who holds a farm land classification under the Assessment Act. To obtain the exemption, bona fide farmers must provide the seller or lessor with a completed "Certificate of Exemption as a Farmer" (available from Consumer Taxation Branch offices) or an imprint of their Farmer Identity Card issued by the British Columbia Federation of Agriculture (BCFA).

Bona fide farmers are now eligible for a refund of the social service tax paid on prescribed equipment and supplies used solely for a farm purpose, and on taxable services provided to such equipment, if the purchase or lease occurs during the two-year period before obtaining farm land classification.

Farmers who do not hold a farm land classification are required to pay tax at the time of purchase on otherwise exempt farm equipment and supplies. The refund will be available to bona fide farmers who submit a refund application on or after March 29, 1995.

The period during which purchasers may obtain a proportional tax refund on motor vehicles they return to the seller is extended from 90 days to one year. This proportional refund applies when the seller only refunds part of the purchase price paid by the purchaser.

Example: Purchase price for motor vehicle:             $25,000
         Tax paid at time of purchase (7%):             $1,750

         Amount of purchase price refunded by dealer:  $20,000
         Tax applicable to this amount (7%):            $1,400

If the motor vehicle is returned to the seller within one year after the vehicle was delivered to the purchaser, the purchaser is eligible for a refund of the tax paid on the amount of the purchase price refunded by the dealer, or $1,400. If the motor vehicle is returned after one year, a refund of the tax is only available if the full purchase price is refunded to the purchaser.

For all other taxable goods, the 90-day period continues to apply for proportional refunds.

The proportional refund does not apply if the goods were traded-in against a new purchase, and a trade-in credit was allowed under section 2(9) of the Social Service Tax Act.

The social service tax refund available on purchases of certain equipment used for mineral exploration in British Columbia is increased from 50 per cent to 100 per cent, and the list of eligible equipment is expanded to include backhoes used solely for trenching, and rock saws. This increase applies to refund applications submitted on or after March 29, 1995, provided that a 50 per cent refund was not already claimed on that equipment.

Businesses must pay the tax at the time of purchase. To qualify for the refund, the eligible equipment must be used in British Columbia for at least the first 12 months after purchase solely to drill, excavate, or directly receive excavated material during the search for mineral ore.

The definition of taxable computer software is replaced by a new definition of taxable software to clarify the existing application of tax, and to exclude major modifications to a packaged or pre-written program that are performed for a specific person.

Software is defined in the legislation to mean packaged or pre-written software programs and modifications to those programs, or the right to use such programs or modifications, whether the software is delivered by electronic, disk, tape or other means, but does not include:

a) modifications to or of software solely to meet the requirements of a specific person if
i) the purchase price or lease price, as applicable, of the modifications is separate from that of the unmodified software, and

ii) the purchase price or lease price of the modifications is greater than the purchase price or lease price, as applicable, of the software in its unmodified form;

b) software modified solely to meet the requirements of a specific person if
i) the purchase price or lease price, as applicable, is for the software as modified, and

ii) that purchase price or lease price is greater than double what it would have been for the software in its unmodified form, or

c) custom software, being
i) software programs developed solely to meet the requirements of a specific person, and

ii) modifications to software referred to in (i) when performed for the person for whom the software was originally developed,

unless the software is a copy of software referred to in paragraph (a), (b) or (c), or the right to use such software, that is sold or leased to someone other than the specific person for whom the software was originally modified or developed.

Example: Taxable pre-written software that normally sells for $1,000

a) A person purchases the pre-written program for $1,000 and pays 7 per cent tax, or $70, on the purchase price. The person later hires a programmer to modify the program to meet their requirements. The cost for the modifications is $1,500. In this situation, the purchase price for the modifications is greater than the purchase price for the pre-written software. The $1,500 charge for the modifications is therefore exempt.

b) As a condition of the sale of the software, the programmer modifies the pre-written software to meet the specific needs of the customer. The modified software is sold to that customer for $2,500. In this case, the price for the modified program is more than double what the price would have been for the software before modifications. Therefore, the total charge to the customer ($2,500) is exempt.

If a copy of the modified software in example (a) and (b) is later sold or leased to a person other than the specific person for whom the software was modified, tax applies to the sale or lease price paid by that other person.

The list of safety equipment that qualifies for exemption is expanded to include the following items.
• Distress flares purchased for use on vessels to draw attention to the vessel when it is in distress.

• Gas detection monitors.

Where a corporation is dissolved or wound up and the corporation's assets are transferred to a related corporation, the corporations are no longer required to remain related for eight months after the transfer to qualify for exemption if the following conditions are met.

Where tangible personal property is purchased by a corporation from a related corporation and

a) tax was paid on the tangible personal property by a related corporation of either the purchaser or the seller, or

b) except for the case described in section 3.14.2 of the regulations to the Social Service Tax Act, no tax was payable on the acquisition at that time,

no tax is payable by the purchaser in respect of the acquisition if all the following requirements are met:
c) the seller and the purchaser were related corporations for a period of not less than 8 months before the date of purchase,

d) at or after the time of the purchase, the seller is dissolved or wound up under the Company Act, the Canada Business Corporations Act (Canada), the Bank Act (Canada), or the Winding Up Act (Canada),

e) the seller and the purchaser remain related corporations until such time as the seller is dissolved or wound up.

For transfers where the selling corporation is not dissolved or wound up, the corporations must continue to be related corporations for at least eight months after the transfer of assets to qualify for the exemption.

Motor Fuel Tax Act

To reduce the complexity of tax compliance for the trucking industry, British Columbia intends to become a member of the International Fuel Tax Agreement (IFTA) on January 1, 1996. IFTA is an agreement among North American jurisdictions which simplifies the collection of fuel taxes from carriers who operate in more than one province or state. The majority of the American states and Canadian provinces are also joining IFTA.

Interjurisdictional carriers based in British Columbia are currently required to complete separate tax returns for each province and state in which they travel. Under IFTA, carriers will only file one quarterly tax return and payment with their home jurisdiction. The return provides a detailed overview of distances travelled and fuel consumed in the member provinces and states.

For example, British Columbia based carriers will file one return with the Consumer Taxation Branch covering their travels in all IFTA member jurisdictions. The branch will then process the information and forward or request funds from each jurisdiction in which the carrier travelled during the reporting period.

Under IFTA, a carrier will be subject to audit by the home jurisdiction only, which is conducted on behalf of all IFTA jurisdictions.

In the fall of 1995, the Consumer Taxation Branch will conduct a comprehensive information and education program for British Columbia based carriers.

Further Information

Consumer Taxation Branch Offices

115 -- 1180 Ironwood Rd.
Campbell River, B.C.
V9W 5P7
Information: 286-7567
Fax: 286-7573

100 Cranbrook St. N.
Cranbrook, B.C.
V1C 3P9
Information: 426-1599
Fax: 426-1253

1201 -- 103rd Avenue
Dawson Creek, B.C.
V1G 4J2
Information: 784-2459
Fax: 784-2211

250 -- 455 Columbia St.
Kamloops, B.C.
V2C 6K4
Information: 828-4507
Fax: 828-4542

114 -- 1420 Water Street
Kelowna, B.C.
V1Y 1J2
Information: 861-7699
Fax: 861-7435

13 Victoria Crescent
Nanaimo, B.C.
V9R 5B9
Information: 755-2658
Fax: 755-2222

310 Ward Street
Nelson, B.C.
V1L 5S4
Information: 354-6799
Fax: 354-6102

112 -- 100 Main Street
Penticton, B.C.
V2A 5A5
Information: 492-1409
Fax: 492-1213

1044 -- 5th Avenue
Prince George, B.C.
V2L 3H9
Information: 565-4299
Fax: 565-6638

103 -- 3220 Eby Street
Terrace, B.C.
V8G 5K8
Information: 638-3486
Fax: 638-3206

500 -- 605 Robson Street
Vancouver, B.C.
V6B 5J3
Information: 660-4524
Fax: 660-1104

Vernon Access Center
3201 -- 30th Street
Vernon, B.C.
V1T 9G3
Information: 549-5660
Fax: 549-5508

540 Borland Street
Williams Lake, B.C.
V2G 1R8
Information: 398-4817
Fax: 398-4208

Victoria Office Location:
1061 Fort Street
Phone: 387-1500
Fax: 387-6218

Victoria Mailing Address:
Parliament Buildings
Victoria, B.C.
V8V 2L9

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