Saskatchewan has introduced retroactive changes to their Provincial Sales Tax Act (“PSTA”) to require marketplace facilitators and operators of online accommodation platforms to register and collect Saskatchewan’s Provincial Sales Tax. The changes, which were announced on June 15th, are retroactive to January 1, 2020. The draft legislation, which is contained in Bill No. 211, also makes electronic distribution services taxable retroactively.
Marketplace facilitator is defined such that it applies to businesses (and individuals) that collect payments from the consumer or user and remit it to the marketplace seller. Similarly, an operator of an online accommodation platform is a “vendor” if they collect payments from the consumer or user of the accommodation.
Unlike Quebec, which is the only other province in Canada with marketplace facilitator rules, there is no minimum threshold. The requirement to collect and remit tax applies to both property and services made through a marketplace facilitator – not just sales of digital property and services. Moreover, tax will need to be collected on sales to not only consumers resident in the province, but also businesses.
Unfortunately, the proposed legislation does not specifically address the collection and remittance obligations of a marketplace facilitator, nor does it address transactions made by a seller (selling on the marketplace) who is registered to collect the tax. As a result, there are concerns with respect to remittance and reporting obligations, bad debts, returns, and refunds. For instance, if the seller is already registered, does the marketplace facilitator still have to collect tax? If there are issues with payment processing such that the seller must write off its receivables as bad debt, can the marketplace facilitator claim a credit for the related tax it collected?
Saskatchewan’s PST was already a difficult sales tax for vendors to analyze prior to the introduction of these new provisions. The PSTA is unusual in that it defines tangible personal property to include data, information, or materials that are transferred, transmitted or distributed by means such as landlines, wires, fibre optic cable, satellites. That is, it attempts to create a legal fiction by deeming intangibles to be tangibles. In addition, the ‘place of supply’ rules related to intangible property and services are not the same as other Canadian sales taxes such as GST/HST. In combination with these new rules, the PSTA’s eccentricities make this tax difficult to program.
In addition to these interpretive complexities, the proposed legislation also raises broader legal issues related to retroactive taxation and the constitutional authority of a provincial government to govern the activities of non-residents not carrying on business in the province.
We hope that these issues will be addressed before the legislation is finalized to provide businesses clarity and certainty with respect to their tax obligations and liabilities.
The authors would like to thank St. John McCloskey for his assistance in preparing this blog.