GST and PST when selling a business in BC and Alberta

Sales tax is easy to forget when you sell a business, and a mistake can cost the buyer or the seller later. Here are the basics for BC and Alberta, in plain words.

GST: the election for selling a whole business

Normally, selling business assets can attract GST. But when you sell a business, and the buyer gets all or substantially all of what they need to carry it on (the CRA says generally 90% or more), you and the buyer can often make a joint election so that no GST is charged on the sale. This is done with CRA Form GST44, and the buyer files it.

• The election is not available if you are a GST registrant and the buyer is not.
• Selling just a few assets, such as one truck, does not count as selling a business.
• Some things can still carry GST even with the election, such as services you'll provide to the buyer after closing, or leases.

BC PST: only on some assets

If you sell the assets of a BC business, PST generally applies to the taxable goods in the sale. The Province of BC lists examples:

• Usually taxable: business equipment, vehicles, tools, computers, furniture, shelving and display fixtures, affixed machinery, office supplies and software.
• Usually not taxable: goodwill, inventory bought for resale, accounts receivable, franchise fees, real property and shares of a business.

If you are registered to collect PST, you charge it on the taxable assets. If not, the buyer generally self-assesses it. When everything is sold for one price, the PST applies to the fair market value of the taxable goods, so it helps to agree how the price is split in the purchase agreement.

BC: the PST clearance certificate

BC says a buyer should get a PST clearance certificate before buying a business. It confirms the seller has paid all PST owing. Without it, the buyer can become liable for the seller's unpaid PST. As a seller, getting this ready early makes the closing smoother.

Share sales

If the buyer buys the shares of your company instead of its assets, the company itself doesn't change hands, so these sales taxes usually don't arise the same way. See asset sale vs share sale.

Alberta: simpler

Alberta has no PST, so only the GST rules above apply. Read selling a business in Alberta for the other Alberta steps, or selling in BC.

For income tax on the sale, read taxes when you sell a small business.