Rescinded [2017-04-01] - Directive on the Payment, Collection and Remittance of Provincial Taxes and Fees

Outlines the requirements for charging, collecting, remitting and paying provincial sales tax (PST) and other provincial taxes or fees (PTF).
Date modified: 2010-05-28

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1. Effective Date

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. Application

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. Context

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.

4. Definitions

Definitions to be used in the interpretation of this directive can be found in Appendix A.

5. Directive statement

5.1 Objective

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.

5.2 Expected results

  • PST and PTF are paid on purchases when applicable.
  • PST and PTF are charged, collected and remitted on taxable supplies when applicable.

6. Requirements

6.1 The Chief Financial Officer is responsible for establishing management practices and controls to ensure:

  • 6.1.1 Departmental managers are made aware of their responsibilities in this context;
  • 6.1.2 Identification of a departmental coordinator;
  • 6.1.3 Records and accounts are maintained; and
  • 6.1.4 Periodic reviews are carried out to determine whether the PST and/or PTF, when applicable, have been accurately paid, recorded and reported.

6.2 Payment and Recording of the QST when the department is a purchaser

Departmental managers who have been delegated responsibilities that include procuring taxable goods and services in the province of Quebec are responsible for:

  • 6.2.1 Complying with the QST provisions in the Comprehensive Integrated Taxation Coordination Agreement and the Reciprocal Taxation Agreement and paying the QST when acquiring or importing taxable goods or services;
  • 6.2.2 Not paying the QST on interdepartmental transactions (i.e. transactions occurring between departments); and
  • 6.2.3 Recording the QST paid or payable on purchases, including purchases made on behalf of other departments, in the QST Refundable Advance Account (QST RAA).

The departmental QST coordinator is responsible for:

  • 6.2.4 Providing the balance of the QST RAA to the Federal Rebate Administrator through the monthly trial balance submitted to the Central Financial Management Reporting System;
  • 6.2.5 Clearing the balance of the QST RAA account when the Federal Rebate Administrator redistributes rebates in the specific amounts through Interdepartmental Settlements;
  • 6.2.6 Maintaining proper records to support periodic reviews, or provincial or other audits. Information related to the QST rebate will be retained for six years after the end of the year in which the rebate application was submitted; and
  • 6.2.7 Responding to enquiries for additional information from Revenu Québec and/or the Federal Rebate Administrator.

6.3 Exemption from paying PST (other than QST) when the department is a purchaser

Departmental managers who have been delegated responsibilities that include procuring taxable goods and services are responsible for:

  • 6.3.1 Claiming an exemption from paying PST on the purchase of taxable goods and services, including purchases made with Government of Canada acquisition cards. When necessary, departments are to provide proof of exemption status by using an exemption certificate or number as specified in the Summary of Reciprocal Taxation Agreements with the Provinces and Territories;
  • 6.3.2 Claiming applicable exemptions when contracting for motor vehicle fleet management services (e.g., when a fleet card is supplied and managed by a service provider). The contract is to accurately reflect the federal government's tax status to ensure that applicable exemptions are automatically obtained when using the fleet card for government vehicle maintenance purchases;
  • 6.3.3 Including a statement in all contract and purchase documents that reflects the department's exemption status from paying PST on purchases made directly on behalf of the department;
  • 6.3.4 Ensuring that there is no claim for an exemption when the Harmonized Sales Tax (HST) or QST applies;
  • 6.3.5 Ensuring that no refund, rebate or remission is claimed from the respective provinces on any PST paid or PST reimbursed to employees; and
  • 6.3.6 Directing any request for a refund of PST paid in error to the merchant and not to the province, when using an acquisition card or other forms of payment.

6.4 Payment of PTF when the department is a purchaser

Departmental managers who have been delegated responsibilities that include procuring taxable goods and services are responsible for:

  • 6.4.1 Approving the payment of PTF as required under provincial or territorial legislation and as defined in the Reciprocal Taxation Agreements. The applicable legislation for each province and territory is listed in the Summary of Reciprocal Taxation Agreements with the Provinces and Territories;
  • 6.4.2 Charging the payment of PTF to a departmental appropriation;
  • 6.4.3 Ensuring that when a purchase includes the supply of taxable goods and services to which both PST and PTF apply, only the exemption from the PST is claimed. Please note that PST exemption numbers or certificates do not exempt the department from paying PTF; and
  • 6.4.4 Approving payment of motor vehicle registration fees for the vehicles owned by a department.

6.5 Registration, collection and remittance of PST and PTF when the department is a vendor

Departmental managers assigned responsibility for managing an activity that includes the sale or supply of taxable goods or services are responsible for:

  • 6.5.1 Registering as a vendor with the provincial or territorial authorities in those provinces or territories that impose or levy PST and/or PTF under a law of a province or territory;
  • 6.5.2 Charging and collecting PST and/or PTF when applicable on the sale or supply of taxable goods and services, except when the purchaser is exempted from paying the PST or PTF by legislation, or is the holder of an exemption certificate;
  • 6.5.3 Filing returns and remitting PST and/or PTF when applicable based on the provincial or territorial requirements;
  • 6.5.4 Paying interest assessed by the province or territory as a result of late remittance or tax adjustments; and
  • 6.5.5 Complying with the additional operational requirements included in Appendix B.

6.6 Monitoring and Reporting

  • 6.6.1 Chief financial officers are responsible for supporting their deputy head by overseeing the implementation and monitoring of this directive in their departments, bringing to the deputy head's attention any significant difficulties, gaps in performance or compliance issues and developing proposals to address them, and reporting significant performance or compliance issues to the Office of the Comptroller General.
  • 6.6.2 The Comptroller General of Canada is responsible for monitoring departments' compliance with the requirements of this directive and in conjunction with its related policy, conducting a review within five years.
  • 6.6.3 Note that federal, provincial and territorial tax auditors may monitor and audit adherence to this directive, federal and provincial tax legislation, and Reciprocal Taxation Agreements.

7. Consequences

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.

8. Roles and responsibilities of government organizations

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

  • submitting the QST rebate application to Revenu Québec on behalf of all federal departments;
  • redistributing the rebate to departments in the specific amounts once the rebate is received; and
  • acting as a single point of contact for communications between the Revenu Québec and the Government of Canada with respect to the administration of the QST rebate.

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.

9. References

9.1 Other relevant legislation and regulations

9.2 Related policy instruments and publications

10. Enquiries

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.

Appendix A - Definitions

management practices and controls (pratiques et contrôles de gestion)

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.

Provincial Sales Tax (PST) (taxe de vente provinciale (TVP))

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.

Provincial Tax or Fee (PTF) (taxe de ou droit provincial)

Is any tax or fee, other than the Provincial Sales Tax described as follows:

  1. Any tax of general application payable on a value, price or quantity basis by the purchaser, lessee, user or consumer of tangible personal property or services subject to the tax in respect of the sale, rental, consumption or use of the property or services, except to the extent that the tax is payable in respect of property or services acquired for resale, lease or sub-lease;
  2. Any fee of general application payable by the owner, user or lessee of any vehicle or item of mobile equipment drawn, propelled or driven by any kind of power in respect of the registration of the vehicle or item or the licensing or certification thereof or in respect of the transfer or renewal of any registration permit, licence or certificate issued for the use of the vehicle or item; and
  3. Any tax of a like nature to a tax described in paragraph (a) or any fee of a like nature to a fee described in paragraph (b) that is from time to time prescribed.
Quebec Sales Tax (QST) (Taxe de vente du Québec [QST])

Is a provincial sales tax in the province of Quebec.

QST Refundable Advance Account (QST RAA) (Compte d'avances remboursables de la TVQ [CAR TVQ])

Is an asset financial reporting account in which amounts paid or payable for the QST on purchases from external entities are recorded.

Reciprocal Taxation Agreement (RTA) (accord de réciprocité fiscale)

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

  1. The payment by Her Majesty in right of Canada of any provincial tax or fee imposed or levied under a law of that province that would be payable by Her Majesty in right of Canada if that law were applicable thereto;
  2. The payment by Her Majesty in right of that province of any tax or fee imposed or levied under the Excise Tax Act that is payable by Her Majesty in right of that province and the waiver of the right to a payment in respect of that tax or fee provided in section 68.14 or 68.19 of that Act;
  3. The payment by Her Majesty in right of Canada to that province or the assignees of that province of amounts determined under the agreement in respect of amounts paid by Her Majesty in right of that province and amounts paid by persons identified in the agreement as or on account of any tax imposed under the Excise Tax Act;
  4. The payment by Her Majesty in right of Canada of interest on any amount equal to any provincial tax or fee imposed or levied under a law of the province that would be collected by Her Majesty in right of Canada if that law were applicable to Her Majesty in right of Canada where those amounts have not been remitted or paid to the province at the rate and in the manner and at the time provided for in the applicable law of the province; and
  5. The collection and the remittance by Her Majesty in right of Canada of any provincial tax or fee imposed or levied under a law of the province that would be collected pursuant to that law by Her Majesty in right of Canada if that law were applicable to Her Majesty in right of Canada.
taxable goods and services (produits et services taxables)

Are goods and services that are purchased, sold or supplied and subject to PST or PTF.

Appendix B–Collection and remittance of PST

The appendix outlines the additional requirement for departmental managers responsible for the activities including selling or procuring the taxable goods or services.

1. Tax rate in province of delivery

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.

2. Registration as a vendor with the province

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.

3. Calculation of PST, GST and HST on invoices

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.

4. Accounting for PST charged, collected and remitted

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.

5. Commissions for collecting and remitting PST

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. Provincial audit of departments

  • 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.

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