Saskatchewan consulting engineers have to charge PST
Consulting Engineers in Saskatchewan are now required to charge provincial sales tax on some of their services. Asi...
Consulting Engineers in Saskatchewan are now required to charge provincial sales tax on some of their services. Aside from the Maritime provinces, which charge a harmonized tax that combines provincial sales tax (PST) and goods and services tax (GST) on services, no other province requires professionals to add provincial tax to their bills.
Saskatchewan’s new rules became effective in July 2000. They apply to all professional groups that are self-governing by Acts of legislation. The only exception is for professionals in the medical field. Accountants, lawyers, architects and engineers in private practice have to charge the 6% tax.
Gordon Beck, P.Eng., executive director of Consulting Engineers of Saskatchewan (CES), says that initially the new rules were not clearly defined. He says this not only led to administrative problems, but also put the province’s consulting engineers at a disadvantage with some of their competitors. Land surveyors, landscape architects and interior designers, for example, do not have to charge the tax. As well, the original rules did not take into account the fact that consulting engineers often do work that is not site-specific, such as preliminary studies and research. In those kinds of projects a Saskatchewan consulting engineer could be competing against out-of-province firms who would not be charging the tax. Such a situation would be impossible for the province to audit.
On behalf of Consulting Engineers of Saskatchewan and in cooperation with the Saskatchewan Association of Architects, Beck began discussions with the government to clarify the rules. Meetings were held in co-operation with Saskatchewan Finance Department officials in Prince Albert, Saskatoon and Regina, and by September the government had agreed to a simplified formula.
Under this new formula the services tax has to be charged only on 30% of the professional fees (plus disbursements) that are associated with site specific work in Saskatchewan. The work subject to the tax comes under Category 3 of the professional engineering association (APEGS) recommended fee schedule, and applies to drawings and specifications for construction. Preliminary work and field services are exempted from the tax. Other work not related to a construction site location, such as engineering for manufactured products is also exempt.
The initial rules imposed in July were so confusing that most consulting firms were spending an hour per invoice to sort out the exemptions. However, it soon became evident that imposing a services tax on consulting engineers’ fees is not as simple as imposing a tax on retail sales. Consulting engineering fees involve all kinds of complicating factors such as progress payments, subconsultants, and the need to hire specialty consultants from outside the province. Now that the tax rules are revised, both the consulting engineers and the government have a system that is at least workable.