PST and Real Property Contractors

Does your business perform improvements to real property? If so, then you are considered to be a Real Property Contractor for PST purposes.

The definitions of improvements to real property and Real Property Contractor are at the bottom of this post.

A Real Property Contractor (RPC) does not charge PST to its customers on materials and services.

A RPC pays PST on the materials it purchases to fulfill its contracts with customers – unless a specific exemption applies.  The PST becomes part of the material expense.

When a RPC (who is GST registered) wants to get a full reimbursement from its customers on materials purchased, the RPC would charge GST on the materials and PST.

Here is an example:

ABC Contracting buys $1,000 of lumber from Home Depot to build new front steps for its client, Miss Brown.  ABC Contracting is charged GST and PST on the lumber.

The total Home Depot invoice is $1,120 ($1,000 plus $70 PST plus $50 GST).

ABC Contracting incurs $500 in labour to build the stairs.

ABC Contracting would bill Miss Brown as follows:

Material ($1,000 plus PST of $70)  $1,070.00

Labour                                                      $500.00

Subtotal                                                 $1,570.00

GST                                                           $ 78.50

Total                                                     $ 1,648.50

For more information please refer to the Small Business Guide to PST.

Improvements to Real Property

Real property is land and any items permanently attached to land (buildings and structures). Goods that become permanently attached to the land, buildings or structures on installation cease to be personal property at common law upon installation and are called improvements to real property.

You are a real property contractor if, under a contract, you construct buildings, or supply and affix, or install, goods that become improvements to real property or supply and affix, or install, affixed machinery. This includes contractors and subcontractors in the construction industry, as well as other businesses that supply goods with installation services where the goods will become affixed machinery or an improvement to real property or upon installation (e.g. flooring, dishwashers).

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Posted on January 21, 2014, in GST/HST & PST, Self-employment and tagged , , . Bookmark the permalink. Leave a comment.

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