BC Gov't FFCS and HEAT PUMPS PST Clarification

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Date Posted: April 1, 2022

Clarification regarding the implementation of the PST on Heat pumps and Fossil Fueled appliances

A

Please note that Notice 2022-003 - Provincial Sales Tax on Fossil Fuel Combustion Systems and Heat Pumps was just revised March 29 to:

• Add information about how parts and components are determined to be part of a fossil fuel combustion system or heat pump system
• Add a transitional situation where additional PST would be owing on a fossil fuel combustion system
• Add information to describe what is considered a heat pump

These revisions and additions to the Notice are quite significant, and may very well address most – if not all -- of the matters that concern you. Please review the revised Notice and feel free to let us know if there are still questions on what is, and is not, considered part of the “initial purchase”, and other matters regarding what constitutes the components of the Fossil Fuel Combustion System (FFCS) or Heat Pump.

There are numerous examples provided in the revised Notice to assist in providing direction as to how the Provincial Sales Tax (PST) will apply to a FFCS and heat pump, as of April 1, 2022. The additional information incorporated into the revised Notice reflects recent feedback and issues/concerns raised by those in the HVAC industry, including retailers, distributors and contractors (the latter of whom are, generally, the end-users and the ones who must pay the PST).

B

Please note that the homeowner/property owner is not the “end-user” of the FFCS/heat pump for the purposes of the PST in British Columbia. The contractor is the purchaser and user of the FFCS/heat pump for their own use in carrying out the real property contract. As such, under the general rules, they must pay the PST on all purchases of taxable goods to be installed into the real property. They do not charge their customer PST. For more information, please see Bulletin PST 501 - Real Property Contractors.

Vendors acquiring goods solely for resale (such as distributors, wholesalers and retailers) may purchase them on a PST-exempt basis by providing the seller with the required documentation. For more information, please see Bulletin PST 208 - Goods for Resale. Therefore, how a seller deals with their purchases and sales will not change. The only thing that is changing is the rate of PST that applies on the retail sale of a FFCS/heat pump to an end user (the contractor in almost all cases).

C

Therefore, what is relevant is what is packaged as the FFCS or heat pump.

• Goods/materials sold at the same time as the FFCS, or heat pump, but which are not a component of the FFCS/heat pump itself at the time of the “initial purchase”, and are not sold/bundled together with the FFCS/heat pump at the time of initial purchase (e.g., generic piping, wiring, ductwork, hangers, etc.…), will remain subject to PST at the standard rate of 7%. This is discussed at some length in the revised Notice, with examples to illustrate how the PST will apply. Likewise with parts sold for an FFCS/heat pump for repair or maintenance – they are not part of the “initial purchase”. At that point it does not matter whether they are being purchased to service the FFCS/heat pump, or some for some other purpose altogether.
• However, if these other items (including screws, wiring, tubing, thermostats, remotes, etc…) are sold as part of the bundle of goods sold as an FFCS/heat pump with the initial purchase of the FFCS/heat pump, then all items included will either be exempt (in the case of a heat pump), or be subject to PST at the new rate of 12% (for a FFCS).
• In the case of a heat pump, the “unit” will include the “box” itself with the compressor (usually located outdoors), as well as the air handler and coils (installed indoors) – provided that they are all purchased together as part of the initial purchase, in which case the exemption will apply to the entire heat pump “kit” purchased as a bundle. Likewise, all of those components purchased as part of the FFCS on the initial purchase will be subject to the higher 12% PST rate. A vendor cannot avoid charging the 12% rate on a FFCS just because they may separately itemize the components of the FFCS. If they are all part of the initial purchase of the FFCS , then they are subject to the 12% rate.
• However, as indicated above, if components are not sold as part of the initial purchase of the FFCS/heat pump, then they will be subject to PST at the standard rate of 7%.

More information on British Columbia’s PST, including registration, and collecting and remitting the PST, can be found in a series of PST Bulletins and Notices, and the Small Business Guide to PST. Our Forms Page contains exemption certificates and forms related to registration, applying for a refund, and self-assessing the PST.

For additional information, including free interactive webinars, informational videos and upcoming events, please visit the PST Outreach webpage. To receive updates about legislative changes and new public information, please “Subscribe To Receive Updates.”

This correspondence describes how the Ministry interprets the relevant tax provisions at the time of writing for information purposes only. This response may be impacted by variations in circumstance, subsequent changes to legislation or Ministry interpretations or subsequent court decisions. The Ministry is not responsible for updating this response if there are any subsequent changes to the law or the Ministry’s interpretation of the law. This response is provided as an aid to understanding the legislation. To confirm the application of the legislation to your particular circumstances, you should consult the legislation and obtain independent legal advice.

Rulings and Interpretations Team
Ministry of Finance
www.gov.bc.ca/salestaxes