BC Digital Services Tax: Registration, Filing, and Exemptions

If you sell software or telecommunication services to customers in British Columbia from outside the province, the B.C. digital services tax registration and filing rules require you to register for the 7% Provincial Sales Tax once your gross revenue from B.C. customers passes $10,000 CAD, then file and pay through the province’s online portal on a schedule tied to how much tax you collect.¹ The rules apply to non-resident sellers and took effect on April 1, 2021.²

When Registration Becomes Mandatory

The registration trigger is a $10,000 CAD revenue threshold measured two ways. You must register if your gross revenue from B.C. customers exceeded $10,000 over the previous 12 months, or if you reasonably expect it will exceed $10,000 over the next 12 months.² Either test on its own is enough.

What counts toward that threshold depends on where you are located. For sellers based outside Canada, only revenue from software and telecommunication services delivered to B.C. customers counts. For sellers based inside Canada but outside B.C., the threshold also includes revenue from physical goods sold and delivered to B.C. customers.² Once you cross the line, you obtain a PST number from the Ministry of Finance and begin charging the 7% tax on every taxable sale to a B.C. customer. The registration obligation continues for as long as you keep making taxable sales into the province.

What Sales the Tax Applies To

Software is taxable regardless of how it reaches the customer. That covers Software as a Service, Infrastructure as a Service, downloaded programs, mobile apps, coded instructions, and application programming interfaces.³ Cloud productivity suites, remote storage, and subscription enterprise tools all fall inside the definition. A download onto a hard drive and a browser-based subscription receive the same treatment.

Telecommunication services reach further than the label suggests. Streaming video and audio, podcasts, audiobooks, music downloads, and ringtones are included, along with any service that lets a user download, view, or access content through a telecommunication system on a device ordinarily located in B.C. A subscription service watched or listened to on a device in the province is taxable.

Deciding Whether a Customer Is in B.C.

The tax turns on whether the customer’s device is “ordinarily situated” in B.C. For stationary equipment such as a desktop computer or a television, the test is simply the address where the device sits. For mobile devices such as phones and laptops, the billing address usually controls.³

When the billing address does not reflect where the device actually lives, secondary indicators fill the gap: the area code assigned to the device (B.C. area codes are 250, 604, 778, and 236), the IP address, or the address where the service is physically provided. If you conclude that a device is outside B.C. and skip the tax on that basis, keep the documentation showing why.³ That record is what an auditor will ask for.

Exemptions to Check Before You Register

Some software sales fall outside the tax entirely. The exemptions most relevant to a business seller are:³

Custom software developed solely for one specific customer, and later modifications to that custom software for the same customer. Separately, “custom modified software” is exempt when the modifications involve source code changes for a specific customer and the price of the modified version is more than double the unmodified version.
Software purchased only to resell it, including the rights to it.
Software bought to be processed, fabricated, or incorporated into other software, telecommunication services, or goods destined for retail sale.
Software bought by qualifying schools and school boards that will be used more than 90% as a teaching aid for students.

Off-the-shelf software is always taxable. The custom software line is where enterprise contracts most often shift out of the tax base, and buyers negotiating large builds should confirm which side of it their deal sits on.

Marketplace Facilitator Rules

If you sell through an online marketplace, the platform may be the one that has to collect PST on your sales. B.C. defines an online marketplace facilitator as a business that contracts with sellers, operates a platform facilitating purchases between sellers and buyers, and collects payments for those transactions.⁴

The facilitator faces the same $10,000 revenue threshold. Once registered, it charges and collects the 7% PST on taxable sales made through its platform, and the 7% also applies to the marketplace services the facilitator itself provides to sellers, including listing fees, advertising, fulfillment, and payment processing. Two points matter for the seller. First, the marketplace seller remains jointly and severally liable if the facilitator fails to collect or remit properly. Second, if you also sell outside the marketplace, you may need your own PST registration for those direct sales. Facilitators also file an annual information return by August 31, covering July 1 of the prior year through June 30.⁴

Filing Frequency and Deadline

How often you file depends on how much PST you collect each year:⁵

More than $12,000 per year: monthly only.
$6,001 to $12,000 per year: monthly or quarterly.
$3,001 to $6,000 per year: quarterly or semi-annual.
$3,000 or less per year: quarterly, semi-annual, or annual.

Each return and payment is due by the last day of the month following the reporting period.⁶ So a monthly filer with a January 31 period-end has until the end of February to file and pay. A business that was required to register but never did defaults to monthly filing.⁵ The province can adjust your frequency if your collection volume shifts.

Filing and Paying Through eTaxBC

Filing runs through eTaxBC, the province’s online tax portal.⁷ After enrolling and signing in, you enter total gross sales to B.C. customers and the tax collected during the reporting period. The system issues a confirmation on submission, and that confirmation is your filing record.

Payment can be made by electronic funds transfer or through your bank’s online bill payment service.⁸ The entire process is online, so a seller anywhere in the world can meet the B.C. obligation without any physical presence in the province.⁹

Records You Have to Keep

Registered sellers must keep all books, records, and documentation related to the business for at least five years.¹⁰ Destroying records before the five-year window closes requires written permission from the province, and if an appeal is open you keep everything until it is resolved.

For a non-resident seller, the highest-value records are the ones that support customer-location decisions and exemption claims. If you decided a customer’s device was outside B.C. and did not charge tax, keep the billing address, IP log, area code, or other indicator you relied on.³ When a customer claims an exemption, keep the exemption certificate or PST number on file and tie it to the specific transaction.¹¹ Electronic formats and electronic signatures are acceptable. If the documentation is not in hand at the time of sale, you are required to charge PST and sort out any refund afterward.

Penalties for Getting It Wrong

Penalties scale with what the Ministry concludes you knew. If the Ministry determines you were aware of the obligation but failed to charge, collect, or remit tax, the penalty is 10% of the assessed amount, and the Ministry may also impose a penalty equal to the full amount of tax you failed to collect.¹²

Interest compounds monthly on any amount late or outstanding.¹² Paying an assessment in full within 30 days of receiving the Notice of Assessment avoids additional interest. Wilful failure to register for PST is listed separately as a penalty trigger, though the province does not publish a fixed dollar amount for that violation. Marketplace facilitators that miss the annual information return face a penalty of $100 or $25 per day the return is late, up to a maximum of $2,500.⁴

The Separate Federal Digital Services Tax

B.C.’s PST is not the same as Canada’s federal Digital Services Tax, and readers registering for one should not assume the other is handled. The federal Digital Services Tax Act imposes a 3% tax on certain Canadian digital services revenue and only applies where a corporate group’s worldwide annual revenue exceeds €750 million and its Canadian digital services revenue exceeds $20 million CAD in the calendar year.¹³ 14 Most sellers dealing with B.C. PST will never touch it, but the two regimes run independently and a qualifying business can owe both.

1
Province of British Columbia. B.C. Provincial Sales Tax (PST)
2
Government of British Columbia. Registering to Collect PST
3
Province of British Columbia. Software
4
Government of British Columbia. Online Marketplace Facilitators and Sellers
5
Province of British Columbia. Report and Pay
6
Government of British Columbia. Guide to Completing the Provincial Sales Tax (PST) Return
7
Province of British Columbia. eTaxBC Online Services
8
Province of British Columbia. Report and Pay PST Through Your Bank
9
Province of British Columbia. Report and Pay PST Using eTaxBC
10
Province of British Columbia. Small Business Guide to PST
11
Province of British Columbia. PST Exemptions and Documentation Requirements
12
Government of British Columbia. Penalties and Interest
13
Justice Laws Website. Digital Services Tax Act
14
Parliamentary Budget Officer. Digital Services Tax