{"id":6644,"date":"2023-06-29T14:42:01","date_gmt":"2023-06-29T21:42:01","guid":{"rendered":"https:\/\/www.thor.ca\/?post_type=tax_alert&#038;p=6644"},"modified":"2025-02-21T12:58:50","modified_gmt":"2025-02-21T20:58:50","slug":"retroactive-legislation-to-reverse-recent-court-decision-on-bc-provincial-sales-tax-and-cloud-computing","status":"publish","type":"post","link":"https:\/\/www.thor.ca\/blog\/2023\/06\/retroactive-legislation-to-reverse-recent-court-decision-on-bc-provincial-sales-tax-and-cloud-computing\/","title":{"rendered":"Retroactive legislation to reverse recent court decision on BC provincial sales tax and cloud computing"},"content":{"rendered":"<p>On June 20, 2023, the Province of British Columbia (the \u201c<strong>Province<\/strong>\u201d) released a <a href=\"https:\/\/www2.gov.bc.ca\/assets\/gov\/taxes\/sales-taxes\/publications\/notice-2023-005-notice-to-providers-purchasers-cloud-software-services.pdf\">Provincial Sales Tax (PST) Notice<\/a> to providers and purchasers of cloud software and services (the \u201c<strong>Notice<\/strong>\u201d). The Notice came in response to the B.C. Supreme Court decision in <em>Hootsuite Inc. v. British Columbia (Finance),<\/em> <a href=\"https:\/\/www.canlii.org\/en\/bc\/bcsc\/doc\/2023\/2023bcsc358\/2023bcsc358.html?autocompleteStr=hootsuite&amp;autocompletePos=1\">2023 BCSC 358\u00a0<\/a>. Our prior <a href=\"https:\/\/www.thor.ca\/blog\/2023\/06\/british-columbia-supreme-court-confirms-that-certain-cloud-services-are-not-liable-to-pst\/#:~:text=The%20British%20Columbia%20Supreme%20Court,at%20issue%20were%20not%20taxable.\">blog<\/a> analyzes the decision.<\/p>\n<p>The Notice stated that the Province intends to introduce legislation to reverse the decision, with retroactive effect. The legislation would aim to apply PST to purchases of cloud computing services (such as Amazon Web Services or Microsoft Azure) and other digital products, as the Province believes it should have applied prior to the <em>Hootsuite <\/em>decision. It is currently unknown how far back the legislation\u2019s retroactive effect will go, and we expect more details in Budget 2024 when the legislation is slated to be released.<\/p>\n<p>According to the Notice, cloud computing services were always intended to refer to the right to access taxable software programs, a taxable telecommunication service, or both. Additionally, while support services (such as customer or tech support) are not taxable, the Province\u2019s position is that support services that include a non-incidental right to use software or telecommunication services were intended to be taxable in whole or in part, notwithstanding the Court\u2019s findings to the contrary in <em>Hootsuite<\/em>.<\/p>\n<p>At this stage, it is unknown what exactly the proposed legislation will entail. While the Notice refers to the use of retroactive legislation as enhancing the certainty for service providers and their customers, we note:<\/p>\n<ul>\n<li>The Province\u2019s current bulletins referred to in the Notice do not speak to cloud computing services.<\/li>\n<li>The Province\u2019s Tax Interpretation Manual \u2013 General Rulings <a href=\"https:\/\/www2.gov.bc.ca\/gov\/content\/taxes\/tim\/pst\/general-rulings\">13\/R.1<\/a> arguably conflicts with the Notice as to how digital product sellers determine the application of PST.<\/li>\n<li>The Court provided multiple strong reasons as to why cloud computing services were not subject to PST.<\/li>\n<\/ul>\n<p>Unfortunately, the use of retroactive legislation to expand the application of PST to software and telecommunication services used by businesses such as Hootsuite may have far-reaching consequences. For example, businesses may consider moving their operations to provinces that either do not have a provincial sales tax (such as Alberta) or provinces where the GST\/HST imposed is refundable (such as Ontario).<\/p>\n","protected":false},"excerpt":{"rendered":"<p>On June 20, 2023, the Province of British Columbia (the \u201c<strong>Province<\/strong>\u201d) released a <a href=\"https:\/\/www2.gov.bc.ca\/assets\/gov\/taxes\/sales-taxes\/publications\/notice-2023-005-notice-to-providers-purchasers-cloud-software-services.pdf\">Provincial Sales Tax (PST) Notice<\/a> to providers and purchasers of cloud software and services (the \u201c<strong>Notice<\/strong>\u201d). The Notice came in response to the B.C. Supreme Court&hellip;<\/p>\n","protected":false},"author":69,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[53],"tags":[],"class_list":["post-6644","post","type-post","status-publish","format-standard","hentry","category-tax-alerts"],"_links":{"self":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/6644","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/users\/69"}],"replies":[{"embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/comments?post=6644"}],"version-history":[{"count":2,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/6644\/revisions"}],"predecessor-version":[{"id":7288,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/posts\/6644\/revisions\/7288"}],"wp:attachment":[{"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/media?parent=6644"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/categories?post=6644"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.thor.ca\/blog\/wp-json\/wp\/v2\/tags?post=6644"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}