1.1 This directive took effect on July 1, 2010 and is amended effective April 1, 2013.
1.2 It replaced the Policy on the Collection and Remittance of Provincial Sales Taxes (Application of Reciprocal Taxation Agreements and Comprehensive Integrated Tax Coordination Agreements) effective on April 1, 1997, excluding that policy's Appendix C—Details of the Reciprocal Taxation Agreements and CITCA by Province and Territory, which is now included in the Summary of Reciprocal Taxation Agreements with the Provinces and Territories.
2.1 This directive applies to departments as defined in section 2 of the Financial Administration Act.
2.2 Those portions of this directive that provide for the Comptroller General to monitor compliance with this directive within departments and request departments to take corrective action do not apply to the Office of the Auditor General, the Office of the Privacy Commissioner, the Office of the Information Commissioner, the Office of the Chief Electoral Officer, the Office of the Commissioner of Lobbying, the Office of the Commissioner of Official Languages and the Office of the Public Sector Integrity Commissioner. The heads of these organizations are solely responsible for monitoring and ensuring compliance with this directive within their organizations, as well as for responding to cases of non-compliance in accordance with any Treasury Board instruments that address the management of compliance.
3.1 This directive supports the Policy on Internal Control by outlining the roles and responsibilities of chief financial officers and departmental managers in charging, collecting, remitting and paying provincial sales tax (PST) and other provincial taxes or fees (PTF).
3.2 A Cabinet decision of September 7, 1961 [X-0325-64RD(01)], established the requirement that departments, corporations, boards and commissions of the Government of Canada that are selling goods or services to register with the provincial authorities in provinces levying PST and collect and remit this tax to the appropriate province.
3.3 Part VII of the Federal-Provincial Fiscal Arrangements Act confers authority on the Minister of Finance, on behalf of the federal government, to enter into Reciprocal Taxation Agreements with any provincial or territorial government, for the payment, collection and remittance of PST and PTF imposed or levied under a law of a province or territory.
3.4 As a general rule, a department as a purchaser of taxable goods and services is exempt from paying PST but is subject to PTF imposed or levied under a law of a province or territory if the province or territory is a party to a Reciprocal Taxation Agreement. The Office of Comptroller General has a government-wide role to obtain and communicate the PST exemption number on behalf of all departments.
3.5 In the province of Quebec, as of April 1, 2013, a department as a purchaser of taxable goods and services is required to pay Quebec Sales Tax (QST) at the point of sale. The Government of Canada has identified the Receiver General for Canada as the Federal Rebate Administrator who will claim a rebate subsequently from Revenue Québec pursuant to the Comprehensive Integrated Tax Coordination Agreement and the Reciprocal Taxation Agreement between Canada and Quebec.
3.6 This directive is issued pursuant to section 7 of the Financial Administration Act.
3.7 This directive is to be read in conjunction with the Policy on Internal Control and the Directive on the Application of the Goods and Services Tax/Harmonized Sales Tax.
3.8 Additional details about Reciprocal Taxation Agreements are summarized in the Summary of Reciprocal Taxation Agreements with the Provinces and Territories.
Definitions to be used in the interpretation of this directive can be found in Appendix A.
The objective of this directive is to ensure that provincial taxes or fees are charged, collected, remitted and paid by all federal government departments as outlined by the provisions of the federal-provincial Reciprocal Taxation Agreements in effect between Canada and most provinces and territories.
Departmental managers who have been delegated responsibilities that include procuring taxable goods and services in the province of Quebec are responsible for:
The departmental QST coordinator is responsible for:
Departmental managers who have been delegated responsibilities that include procuring taxable goods and services are responsible for:
Departmental managers who have been delegated responsibilities that include procuring taxable goods and services are responsible for:
Departmental managers assigned responsibility for managing an activity that includes the sale or supply of taxable goods or services are responsible for:
7.1 In instances of non-compliance, deputy heads are responsible for taking corrective measures within their organization with those responsible for implementing the requirements of this directive.
7.2 In support of the responsibility of deputy heads to implement the Policy on Internal Control and related instruments, chief financial officers ensure corrective actions are taken to address instances of non-compliance with the requirements of this directive. Corrective actions can include requiring additional training, changes to procedures and systems, the suspension or removal of delegated authority, disciplinary action, and other measures as appropriate.
7.3 For a range of consequences for non-compliance with this Directive, refer to the Framework for the Management of Compliance.
7.4 Individuals are reminded that sections 76 to 81 (Civil Liabilities and Offences) of the Financial Administration Act as well as sections 121 (Frauds against the Government), 122 (Breach of Trust), 322 (Theft) and 380 (Fraud) of the Criminal Code may apply.
7.5 Organizations and individuals may be subject to consequences as set out in federal and provincial tax legislation, and Reciprocal Taxation Agreements.
This section identifies other significant departments with respect to this directive. In and of itself, it does not confer any authority.
8.1 The Department of Finance Canada is responsible for negotiating and maintaining the Reciprocal Taxation Agreements with the provinces and territories.
8.2 The Treasury Board Secretariat (Office of the Comptroller General) is responsible for development, oversight and maintenance of this directive and for providing interpretative advice. In addition, it is responsible for obtaining and communicating the PST exemption number on behalf of all departments.
8.3 The Receiver General for Canada is the QST Federal Rebate Administrator and is responsible for
8.4 Federal, provincial and territorial tax auditors may review books and records to see if taxes and fees have been properly charged, collected, remitted and paid.
10.1 Please direct enquiries about this directive to your departmental headquarters. For interpretation of this directive, departmental headquarters should contact:
Financial Management Policy Division
Financial Management and Analysis Sector
Office of the Comptroller General
Treasury Board Secretariat
Ottawa ON K1A 0R5
Email: fin-www@tbs-sct.gc.ca
Telephone: 613) 957-7233
Fax: (613) 952-9613
Enquiries concerning the Reciprocal Taxation Agreements should be directed to:
Director, Intergovernmental Tax
Policy, Evaluation and Research Division
Tax Policy Branch
Department of Finance
Ottawa ON K1A 0G5
E-mail: fin-www@fin.gc.ca
Telephone: 613-947-3341
Fax: 613-947-1677
10.2 Enquiries concerning provincial or territorial tax legislation should be directed to the provincial or territorial tax office. See the Summary of Reciprocal Taxation Agreements with the Provinces and Territories for contact information.
Are policies, processes, procedures and systems that enable a department to operate its programs and activities, use its resources effectively, exercise sound stewardship, fulfil its obligations and achieve its objectives.
Is the general sales tax levied under a provincial retail sales tax statute or its equivalent that is payable by the purchaser on the value of taxable goods and services acquired.
Is any tax or fee, other than the Provincial Sales Tax described as follows:
Is a provincial sales tax in the province of Quebec.
Is an asset financial reporting account in which amounts paid or payable for the QST on purchases from external entities are recorded.
Is an agreement between the federal government and the government of any province or territory that provides, without restricting the generality of the foregoing, for all or any of the following matters, namely
Are goods and services that are purchased, sold or supplied and subject to PST or PTF.
The appendix outlines the additional requirement for departmental managers responsible for the activities including selling or procuring the taxable goods or services.
The tax rate that is applied on the sale of taxable goods and services is determined by the province where the goods or services are to be delivered.
Departments selling or supplying taxable goods and services to external parties (such as employees, Crown corporations or the public) that will be delivered in British Columbia, Manitoba, Quebec, and Saskatchewan are considered to be vendors by provincial legislation, and as such, are required to apply for a vendor registration certificate from the appropriate provincial authority.
The department is required to contact the designated provincial representatives and provide information on the nature of the sale or supply of goods and services including potential clients, and the estimated dollar volume of transactions. The province will determine whether the department is required to register as a vendor. If registration is necessary, the province will issue a vendor registration certificate and will provide applicable instructions, including tax information and due dates for provincial tax returns.
When applicable, the PST and the GST are calculated independently and must be shown separately on an invoice. The PST rate is set by each province. For details on the method of calculating PST in a specific province, consult the provincial web sites that are listed in the Summary of Reciprocal Taxation Agreements with the Provinces and Territories.
There is no PST in certain provinces or territories, such as Alberta, Yukon, Northwest Territories, and Nunavut.
The HST rate is applied directly to the selling price of the taxable good or service in provinces where HST is applicable.
When taxable goods and services are provided to external parties, the PST is recorded in a liability account at the time the invoice is issued. The entire amount of the sale including the related PST is recorded as an account receivable.
When the invoiced payment is received, it is deposited in the Consolidated Revenue Fund and credited to the accounts receivable sub-ledger account.
Departments that sell or supply taxable goods and services are required to establish a PST liability account in their general ledger that complies with Receiver General requirements.
PST is remitted based on the amounts accrued in the PST liability account at the end of the reporting period. When the tax is remitted to the appropriate province, a debit entry to the PST liability account is made.
Most provinces, such as British Columbia, Manitoba, and Saskatchewan, offer vendors a commission as a form of compensation for collecting and remitting PST.
When commissions are claimed, the commission is subtracted from the remittance made to the province. The amount of the commission is debited from the PST liability account and credited as "Other Revenue - Proceeds From Sales - Other". When parliamentary authority to net vote has been established, the commission may be credited to the same account provided the appropriate authority code representing re-spendable revenue is used.
6.1 Records, access and timing
Proper records on goods and services sold or supplied and on PST collected, remitted and owing must be kept to permit verification by all provinces that have a Reciprocal Taxation Agreement in effect. These records may include sales invoices, sales journals, cash register tapes, general ledgers, daily sales reports, and records of goods acquired for sale.
During a provincial audit, federal vendors are to provide provincial officials with access to their records and upon request are required to explain the procedures for their sale or supply activities.
Provincial audits will take place periodically when considered necessary by the provinces.
6.2 Non-compliance with PST legislation
When a provincial audit indicates that a department has not complied with a provision of the provincial tax legislation, the provincial authority may recommend changes to correct departmental procedures in the areas of non-compliance.
6.3 Required tax adjustments
When a provincial audit determines that a federal vendor has failed to collect and remit the tax, or has collected and not remitted the tax, the province may request payment of a PST adjustment for the amount of tax that should have been charged and/or remitted, including interest where applicable. However, under the terms of the Reciprocal Taxation Agreements, the federal vendor is not subject to penalties.
In either of these cases, the province will send the federal vendor a "Request for Payment of Tax Adjustments." The department is required to review the documentation provided by the province supporting the tax adjustment, and if in agreement, pays the required amount to the province within 90 days of receipt of the formal request. For cases where there is disagreement with the tax adjustment, see Section 6.4, "Dispute resolution."
Tax adjustments for situations when the department has failed to charge and remit the PST are paid from departmental appropriations and are charged to object of expenditure 3259 Miscellaneous Expenditures not Elsewhere Classified. Tax adjustments for situations where the department has collected the PST and has not remitted the tax are charged to the PST liability account where the tax receipt is held.
6.4 Dispute resolution
When there is disagreement with the determinations made by a provincial audit and the resulting tax adjustment, the matter is referred to the Financial Management Sector of the Office of the Comptroller General at the Treasury Board Secretariat. Discussions will take place between officials of the Treasury Board Secretariat, the Department of Finance and the province concerned to resolve the disagreement.
If the dispute cannot be settled at this level, the matter may be referred for decision to a board established in accordance with the terms of the applicable Reciprocal Taxation Agreement.