This page explains how PST applies to the purchase and sale of business assets as part of the sale of a business.
A purchaser should ensure they have a clearance certificate issued by us before buying a business (or before purchasing goods, software or an interest in a business through a bulk transaction). The certificate confirms that the seller paid all amounts owing under the relevant legislation including penalties and interest.
If a newly purchased business is required to be registered to collect and remit PST, the business must be registered before it makes any taxable sales or leases in B.C. For more information, see Register to collect PST.
For information about buying and selling:
PST applies to the sale of new and used goods and software, unless a specific exemption applies. When all or part of the assets of a business are sold, PST applies to the assets that are taxable goods or software. Taxable assets include:
Generally, affixed machinery is machinery, equipment or apparatus that is:
For example, items that may be affixed machinery depending on how they are installed include:
Some equipment may meet the above definition of affixed machinery but is not considered affixed machinery for the purpose of PST. This includes equipment that is attached to or installed in a building for the purpose of heating, air conditioning or lighting.
If the business that is being purchased includes real property that has affixed machinery already installed, PST applies to the purchase price of that affixed machinery, unless a specific exemption applies. For more information, see Bulletin PST 503, Affixed Machinery (PDF, 340KB).
However, certain affixed machinery is exempt from PST if the affixed machinery qualifies for the production machinery and equipment exemption. For more information, see Bulletin PST 110, Production Machinery and Equipment Exemption (PDF, 510KB).
PST does not apply to the following:
Franchise fees and royalty fees are fees that a franchisee pays to a franchisor for the right to market a product or service using the trademark and trade name of another company. PST does not apply to franchise fees and royalty fees unless they include the purchase of taxable goods or software.
Goodwill represents the value of a business’s good reputation and relationship with customers beyond the value of the other business assets. PST does not apply to goodwill.
However, the value of the goodwill that the purchaser and seller agree to must be reasonable. The purchaser and seller cannot agree to increase the price of goodwill and reduce the price of the taxable assets below the fair market value to avoid paying PST. We may ask for information that supports the value of the taxable assets.
PST does not apply to inventory (goods for resale). To purchase the seller’s inventory exempt from PST, the purchaser must give the seller their PST number or, if the purchaser does not have a PST number, a completed Certificate of Exemption – General (FIN 490) (PDF, 200KB).
However, if the seller takes taxable items from their resale inventory for business or personal use, they must self-assess and remit the PST due on their next PST return. If the seller is not yet registered for PST, they must self-assess the PST due using a Casual Remittance Return (FIN 405) (PDF, 260KB) on or before the last day of the month following the month they converted the taxable items to business or personal use. For example, if the seller uses a taxable item in their business in June, they must file the return and pay the PST no later than July 31.
Real property is land and anything that is attached to the land so it becomes part of real property upon installation (ceases to be personal property at common law). PST does not apply to real property.
Real property generally includes:
PST applies to affixed machinery, even when included in a purchase of real property. For more information, see Bulletin PST 501, Real Property Contractors (PDF, 350KB).
Note: While PST does not apply to purchases or transfers of an interest in real property, property transfer tax may apply.
When buying a business, PST applies to all taxable business assets. If the seller is a collector, the seller must collect and remit PST on the sale of taxable business assets. A collector must collect and remit PST on taxable sales until the date of cancellation of their registration.
If the seller is not a collector or does not charge PST on the taxable assets, the purchaser must self-assess and remit the PST due on their next PST return.
If the purchaser does not have a PST number, they must self-assess the PST due using a Casual Remittance Return (FIN 405) (PDF, 260KB) on or before the last day of the month following the month the taxable items were purchased. For example, if a taxable item was purchased in July, the return must be filed and the PST paid no later than August 31.
For more information see the Small business guide to PST.
A bundled sale occurs when taxable and non-taxable assets are sold together for a single price. Generally, PST only applies to the fair market value of the taxable assets. If a seller who is a collector makes a bundled sale, they must charge the purchaser PST on the fair market value of any taxable goods included in the sale.
For example, if pizza ovens that are affixed machinery (taxable), office equipment (taxable) and real property (not taxable) are sold together for a single price, the collector must charge the purchaser 7% PST on the fair market value of the pizza ovens and office equipment.
For more information, including exceptions to the bundled sales rule, see Bulletin PST 316, Bundled Sales and Leases (PDF, 410KB).
The following examples show how the PST applies when buying and selling a business.
Example 1 – buying a restaurant
A purchaser is buying a restaurant. The purchaser arranges with the seller who is a collector to buy the industrial grill and ranges, cooking dishes, inventory, tables and chairs, office equipment and serving dishes and utensils. The purchaser and the seller agree that the purchaser will pay $100,000 for the business. Goodwill is included in the purchase price.
Because this is a bundled sale, PST applies to the fair market value of the taxable assets. The purchaser does not yet have a PST number, so they provide the seller with a completed Certificate of Exemption – General (FIN 490) (PDF, 200KB) for the inventory. The goodwill is non-taxable. The industrial grill and ranges are subject to PST as affixed machinery. In these circumstances, PST applies to the industrial grill, ranges, cooking dishes, tables, chairs, office equipment, serving dishes and utensils as follows:
Taxable assets
Industrial grill, ranges, cooking dishes, tables, chairs, office equipment, serving dishes and utensils = $85,000
Exempt assets
Inventory (goods for resale such as take out containers and merchandise) = $5,000
Non-taxable assets
Goodwill = $10,000
Subtotal = $100,000
​7% PST (applied only to taxable assets) = $5,950
Total cost of the restaurant = $105,950
Example 2 – buying a winery
A purchaser is buying a winery. The purchaser arranges with the seller who is a collector to buy the buildings and land, winemaking equipment (such as presses and tanks), office equipment, accounts receivable and goodwill.
The winemaking equipment qualifies for the production machinery and equipment exemption. The purchaser provides the seller with a completed Certificate of Exemption – Production Machinery and Equipment (FIN 492) (PDF, 230KB) and is exempt from PST on the equipment. The real property, accounts receivable and goodwill are non-taxable. In these circumstances, PST only applies to the office equipment as follows:
Taxable assets
Office equipment = $5,000
Exempt assets
Winemaking equipment = $50,000
Non-taxable assets
Real property = $300,000
Accounts receivable = $3,000
Goodwill = $100,000
Subtotal = $458,000
7% PST (applied only to taxable assets) = $350
Total cost of the winery = $458,350
Before buying a business or buying goods, software or an interest in a business through a bulk transaction, the purchaser should ensure that they have a clearance certificate issued by us. The certificate confirms that the collector has paid all outstanding PST and any related penalties and interest up to the date the certificate was issued. If the purchaser does not obtain a clearance certificate, they are liable for an amount equal to any outstanding amount owed by the collector.
The collector can apply for duplicate copies of the clearance certificate and provide one copy to the purchaser. The purchaser may also, with the consent of the collector, request a copy of the clearance certificate directly using the online Application for Clearance or by completing the printable Application for Clearance (FIN 447) (PDF, 300KB) and providing it to us.
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