PST Rate Reduction to 5%

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To:	Deans, Department Heads and Administrative Assistants
From:	Tracey McHardy, Taxation Manager
Date:	October 31, 2006
Subject:	PST - Rate Reduction to 5% (effective October 28, 2006)

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Effective October 28, 2006, the PST rate was reduced to 5%.

Units on campus that provide PST-taxable goods and services must ensure client invoices reflect the appropriate PST rate. To determine the appropriate rate, refer to the transitional rules below.

As well, units on campus must ensure vendors are charging the university the appropriate PST rate. This may require tracking of receiving dates for PST-taxable goods; the invoice due date for PST-taxable services and in limited cases, it may be necessary to determine an appropriate prorate (e.g., leased equipment, electrical usage). To determine the appropriate rate, refer to the transitional rules below.

For significant purchases, where the vendor has not charged the appropriate PST rate, your unit must contact the vendor and ask for a credit note. For example, if you placed an order on October 25, 2006; the goods are shipped on Thursday October 26, 2006 but the university does not receive those goods until November 1, 2006. In this example, PST should be at 5% as the goods are not received until after mid-night on October 27, 2006. If the vendor's invoice reflects PST at 7%, a credit note should be requested. We strongly recommend the credit note option rather than the vendor issuing an amended invoice (to reduce the chance of paying both invoices).

The PST reduction will also affect items purchased on the PCard.

Payment Services will send out a separate communication to units that provide feeds into Uni-Fi to manage the data entry of invoices which can have old or new PST rates.

Transitional Rules:

The transitional rules depends on whether the transaction relates to a good or service.

1. Taxable goods
   
   Application of the new tax rate depends on when the customer has taken deliver of the taxable good.
   
   For taxable goods received before October 28, 2006, PST applies at 7% (regardless when payment is due or made).
   
   For taxable goods received on or after October 28, 2006, PST applies at 5% (even if the goods were ordered or payment was made earlier).


2. Taxable services (including telecommunication services)
   
   Unlike taxable goods, for taxable services, the application of the new tax rate depends on when payment has been made or has become due (whichever is earlier). This is the case even if the billing period straddles October 28. Accordingly, even if services were obtained prior to October, 28, the lower rate of 5% will apply provided the invoice is not due before this date and no prepayment was made.
   
   Where payment is due on or after October 28, 2006 for a taxable service, PST applies at 5%, unless payment is made before October 28, 2006.


3. Leases and electricity(non-residential)
   
   Where the billing period straddles October 28, the PST will be pro-rated. Where a customer has already been billed PST at 7% for a period that straddles October 28, the vendor should provide a PST adjustment on the next billing.


4. Refunds and cancelled sales
   
   The tax adjustment for refunds and cancelled sales is based on the tax rate charged on the initial sale.

There has been no change to the types of goods and services subject to PST and the Saskatchewan liquor consumption tax remains at 10%.
Saskatchewan Finance has further information (including answers to common questions) on its website at: http://www.gov.sk.ca/finance/revenue/news.htm

If after reading the information on Saskatchewan Finance's website you still have questions, please do not hesitate to contact me.

 

Ms. T. McHardy, CA
Taxation Manager