In Brief
British Columbia’s (“BC”) 2026 budget proposes to significantly expand its provincial sales tax (“PST”) base by bringing several additional services into scope (“Additional Services”), and eliminating certain existing exemptions, effective October 1, 2026. Businesses which provide the Additional Services inside, or, in some cases, outside, BC may need to register to collect and remit BC PST. The changes are expected to result in significant, additional, unrecoverable taxes for BC businesses, in turn, eroding competitiveness in the province. Rather than making incremental changes to the PST, a better policy approach would be for BC to (re-)adopt harmonized sales tax (“HST”).
In Depth
BC is projected to run a $13.3 billion budget deficit in its 2026-27 fiscal year, up from $9.6 billion the year prior. Media coverage has framed the tax increases and PST base expansion as measures aimed at curbing increased provincial debt while protecting critical services. The 2026 Budget materials also justify the changes on the basis that BC’s “economy has shifted significantly towards services, which have largely remained untaxed under the PST,” and that many services have historically fallen outside the PST base.
The 2026 budget bill proposes amendments to make the following Additional Services taxable when provided to purchasers or beneficial recipients that reside or carry on business in BC, or where the services otherwise relate to BC:
- Accounting (and bookkeeping) services – Including preparing accounting records and providing assurance services (e.g., auditing/reviewing), and bookkeeping, (excluding services provided by an employee to their employer).
- Architectural services – Advice or services within the practice of architecture and provided by a person who is registered or required to be professionally registered for such services under BC law, and any services prescribed as such.
- Engineering (and geoscience) services – Advice or services within the practice of professional engineering or professional geoscience and provided by a person who is registered or required to be registered under BC law with the Association of Professional Engineers and Geoscientists of the Province of British Columbia, and any services prescribed as such.
- Rental property and strata management services (including non-residential real estate commissions) These are captured under “non‑residential real estate services,” meaning real estate services provided by a person who is licensed (or required to be licensed) under the Real Estate Services Act (including similar services provided by appropriately licensed persons in another jurisdiction), and any services prescribed as such. PST will apply where the services are provided in relation to real property located in BC, though there are some exceptions, including for services provided in relation to property assessed solely as class 1 or 3 under the Assessment Act (i.e., residential‑class property).
- Security services – Certain services provided by a person who holds or is required to hold a security business license within the meaning of the Security Services Act (e.g., private investigation, security guard services, alarm services, security consulting, etc.).
For architectural, engineering, and geoscience services, PST will apply to only 30% of the purchase price.
This aligns BC with the other PST provinces, Manitoba and Saskatchewan, which already tax such services calculated on 30% of the purchase price. This approach appears to be designed to reduce cascading tax in construction projects and notionally capture the (taxable) design service element of such services.
The draft legislation aligns with the current legal services provision to provide for a “reasonable estimate” approach to allocate the purchase price of such services across multiple provinces.
The budget also proposes eliminating certain PST exemptions. These include exemptions for clothing patterns, yarn, and other textiles commonly used in making or repairing clothing, as well as exemptions for services related to clothing and footwear, such as alteration and repair services (though basic laundry services remain exempt). The proposals would also remove long-standing exemptions for certain telecommunications services, including basic cable television, toll‑free telephone, and residential landline services — ostensibly to ensure fairness with similar services offered through other means that are already taxable. PST would apply to these goods and services from October 1, 2026, onwards.
Going Forward
Overall, the 2026 budget measures meaningfully expand the BC PST base. Under the backdrop of a projected $13.3 billion deficit, the changes appear aimed at raising additional revenue, as opposed to — and seemingly to the detriment of — supporting the competitiveness of BC businesses.
If revenue generation is the objective, the measures raise a broader question: whether harmonization with GST is a more efficient option. While BC has already gone down this road before — see its ill-fated harmonized sales tax adventure from 2010 to 2013 — one wonders whether its goals would be better served by a broad-based, value-added tax without the need for piecemeal base expansion and increasing the tax load for BC businesses.
Nick Turco, Articling Student, has contributed to this legal update.
