B.C. Changes Software Law Retroactive 10 Years to Make More Things Taxable
As some in British Columbia are aware, British Columbia passed marketplace facilitator legislation that made many Amazon services, including advertising, taxable for PST. The Province's argument has been that many of these services are software.
The Province has been on a crusade in recent years and taking a similar tack with a number of tech companies and services. Recently the Province deemed that web hosting was taxable. In 2022 Hootsuite took the province to court over the Province arguing that web hosting (specifically its AWS web hosting) was not software and should not have PST applied.
The province ultimately lost the court case with the court ruling in Hootsuite Inc. v. British Columbia (Finance). The Ministry of Finance unsuccessfully argued that the provision of Amazon web services were taxable because it involved either the purchase of software or of telecommunication services for use on an electronic device located in British Columbia. Ruling in favour of Hootsuite, the British Columbia Supreme Court concluded that there was a clear distinction between the term “software” as used in its general sense, and the term “software” as defined in the PSTA. The BCSC noted that “the range and scope of software has expanded so dramatically into so many products and services over the years, the legislature drew a distinction between software and software programs for taxation purposes.”
So what did the province do after losing the case to Hootsuite? The Province, rather than appeal the decision, instead changed the legislation to ensure web hosting was in fact taxable. However, in the 2024 budget they amended the definition of software retroactive over 10 years to 2013! This means even if a service was not taxable previously, it could now be taxable retroactively. In essence, it would be as if you purchased a bicycle (which are PST exempt) in 2021 for $1000 and the government changed the law in 2024 and said that bikes would no longer be exempt effective 2013 and you need to send in a cheque for $70 for your bike previously purchased.
The move continues towards making British Columbia the least tech friendly province in Canada. In every single other province with HST, such taxation would be refundable as an input credit but as B.C. is one of the few provinces without HST, it is not. Ultimately it would seem the only solution is a political one and I highly encourage you to reach out to your local MLA. If you are an MLA and would like to speak to me directly please reach out to me directly to dave@ecomcrew.com. If you are a concerned seller please let your feedback be known in the comments section of this article.
