Under the Provincial Sales Tax Act (British
Columbia), a software program, or a right to use a software
program, purchased for use on an electronic device ordinarily
situated in B.C. is subject to PST. However, the emergence of cloud
computing, including software-as-a-service business models,
challenged the application of PST.
In Hootsuite Inc. v. British Columbia
(Finance) (Hootsuite) the Ministry of Finance
assessed Hootsuite Inc., a social media management company, for
failing to self-assess PST on cloud computing and storage services
and support services purchased from a United States supplier. The
B.C. Supreme Court agreed with Hootsuite and held that the cloud
computing and storage were the purchase of on-demand computer
infrastructure service and the support services were the purchase
of technical expertise. On-demand computer infrastructure services
allowed virtual access to the vendor's hardware and the support
services were accessed through an online chat feature which was
opaque to Hootsuite. These were both non-taxable and not included
in the definition of taxable software or any other taxable
service.
In response to Hootsuite, the B.C. government published a
notice to providers and purchasers of cloud
software and services. The notice states that the B.C.
government intends to introduce retroactive legislation in the 2024
provincial budget that would impose tax on these services. In the
intervening period, cloud computing service providers and their
customers should continue to follow the Ministry of Finance's
policy set out in Bulletin PST 105 and Bulletin PST 107.
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