Buying or selling a vehicle privately in BC after October 1, 2022? The Provincial Government’s PST rules have changed.

Earlier this year, the BC Government announced a change was coming to how PST is calculated on private motor vehicle sales, effective October 1, 2022.

Under the old system, the province would calculate PST based simply on the purchase price declared. This means some declared prices could have been under-stated, causing a tax ‘loophole’ that the province claims could create a shortfall of some $30 Million annually.

The Basics

In simple terms, PST will now be calculated for you at the time of vehicle registration, based on the vehicle’s declared or average wholesale value. The PST collected on a motor vehicle purchase will now be calculated based on the purchase price or the Canadian Black Book average wholesale value, whichever is greater. There are some exceptions and unique situations to be aware of, so your Allwest auto insurance experts have gone through the new rules to help deliver some much-needed clarity.

(If you don’t want to keep reading, just come into your local Allwest office or give us a call. We’re happy to deliver clarity in person!)

How is vehicle value determined? Purchase Price, Average Wholesale Value and Appraised Value – you need to know the difference.

With the new system, a vehicle’s value for PST can be calculated in a few different ways at registration time.

Purchase Price – The Designated Purchase Price is the total price paid for a motor vehicle before a deduction for a trade-in or down payment.

Average Wholesale Value – The Average Wholesale Value of a vehicle is listed in the Canadian Black Book, a valuation guide used by ICBC, auto dealers and other industry professionals.

Appraised Value – This is the value of a vehicle if a Motor Vehicle Appraisal is done by a professional..

Generally, PST will be calculated on the greater of either the Purchase Price or the Average Wholesale (Black Book) Value.

If a vehicle is appraised, and the Appraised Value is MORE than the Wholesale Value, then PST is still calculated as above, on the greater of the Purchase Price or the Wholesale (Black Book) Value. However, if a vehicle is appraised and the Appraised Value is LESS than the Wholesale Value, then PST is calculated on the greater of the Appraised Value and the Purchase Price.

Private Sale vs. Buying from a GST Registered Dealership. Which is better for PST?

If a vehicle is purchased through a registered dealership, there is no additional valuation process for the vehicle. PST is calculated at the dealership and paid on the Purchase Price (at a rate of 10%. That’s 2% lower than the private sale PST rate of 12%)

Bringing a vehicle into BC? That will be evaluated for PST as well.

If a vehicle is being imported into BC, either from another province or country, PST will have to be calculated at registration time, as above, with additional calculations for depreciation. To learn more, roll up your sleeves and plow through the BC Government document, PST on Motor Vehicles Purchased at Private Sales or Imported from Outside Canada (gov.bc.ca)Or just talk to your local Allwest broker.

Are there any exceptions? Gifted, modified, collector vehicles and more.

There are some exceptions to the new PST rules.

Gifted Vehicles – Motor vehicles received as taxable gifts are not subject to the new purchase price rules but will continue to be subject to PST on the fair market value of the motor vehicle.

Modified Vehicles – Including vehicles with modifications for persons with disabilities and vehicles with modifications for specific business purposes.

Motor vehicles where the average wholesale value cannot be determined If the average wholesale value of the motor vehicle is not listed in the Canadian Black Book valuation guide by year, make, model and trim, (such as some collector vehicles) the vehicle’s Purchase Price is used.

Other exceptions include: Motor vehicles purchased from GST registrants in Canada; Motor vehicles where a trade-in was accepted toward the purchase of the vehicle; and Multijurisdictional vehicles.

Or just talk to your local Allwest broker to learn more about how to apply the PST rules.

Want to avoid the PST altogether? Buy electric.

Beginning February 23 2022, and effective for the next 5 years, zero-emissions vehicles will be exempt from B.C.’s provincial sales tax, when purchased as “used,” (which the government defines as having been driven over 6,000 km)

So if you’re vehicle shopping, make sure to budget for the PST. If you have a specific make, model and year in mind, talk to your Allwest broker first, to get an idea of the average wholesale value and the PST you can expect to pay.

Links:

Bulletin PST 308 – PST on Vehicles – https://www2.gov.bc.ca/assets/gov/taxes/sales-taxes/publications/pst-308-vehicles.pdf

Canadian Black Book – https://www.canadianblackbook.com

PST on Motor Vehicles Purchased at Private Sales or Imported from Outside Canada (gov.bc.ca) – https://www2.gov.bc.ca/assets/gov/taxes/sales-taxes/publications/notice-2022-005-pst-on-motor-vehicles-purchased-at-private-sales-or-imported-from-outside-canada.pdf