B.C. just changed how PST is calculated on used car sales. Here's what you need to know

New PST rules on cars

The B.C. government says it will generate an estimate $30 million annually with a new policy to more vigorously tax used car sales.

As of Oct. 1, provincial sales tax for any car sold in a private sale or imported into the province from outside of Canada will be determined by the Canadian Black Book value.

Beforehand, one could theoretically under declare a sale price in order to evade part of the provincial sales tax (PST), particularly in a cash transaction.

Now, it no longer matters what the actual sale price of the vehicle is; the tax will be applied to the wholesale book value should it be greater than the sale price.

This, said car appraiser Carey Scarrow, could lead to an uptick in British Columbians having their cars appraised at a lower value for the purpose of a sale.

That’s because in instances where the buyer believes the value is less than the wholesale book value, due to factors such as excessive wear, mechanical defects and damage, a buyer can present the Insurance Corporation of British Columbia with a completed "Motor Vehicle Appraisal Form" and the tax will apply to the lower appraisal value.

“We’ve had some inquiries at the start of the week and I’d expect more to come,” said Scarrow of Coast Auto Appraisals.

Appraisals, which cost $150 to $350 according to Scarrow, may be done by a motor dealer registered under the British Columbia Motor Dealer Act or “a person whose business it is to appraise motor vehicles,” according to a Ministry of Finance bulletin.

Scarrow said car appraisers are not regulated and so the PST forms will depend on an honour system.

The government claims it will audit sales should it find inconsistencies.

Regardless of any appraisal, the government will tax the higher of the sale price and the wholesale book value. If a vehicle is not listed by year, make, model and trim in the Canadian Black Book, the average wholesale value cannot be determined, and PST will be calculated on the designated purchase price, according to the bulletin.

Appraisal claims may be done up to 30 days after the purchase.

A vehicle is not subject to the new rules if it was purchased from a motor vehicle dealer (a GST registrant) and not as part of a private sale. And government will not tax the higher value of a vehicle modified for disabled passengers. Vehicles where a trade-in was accepted toward the purchase of the vehicle also do not apply to the new rules; nor are vehicles received as taxable gifts.

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