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Tax Alert 2021 No. 32, 22 November 2021
Following the lead of British Columbia,1 Saskatchewan and Quebec,2 Manitoba has expanded its Provincial Sales Tax (PST) registration requirements for online marketplaces, online accommodation platforms and streaming services. The registration requirements stipulate that they include out-of-province and non-Canadian businesses that “enable or facilitate” sales made in Manitoba, but do not otherwise carry on business in the province (see below).
On 14 October 2021, Manitoba amended The Retail Sales Tax Act requiring “online accommodation platforms”, “online sales platforms” and other digital service providers to be registered for and collect PST at 7% from customers located in Manitoba. Affected businesses will also be required to file monthly, quarterly or yearly returns. These requirements come into force on 1 December 2021.3
However, there remains a significant issue as to whether Manitoba has the legislative authority under Canada’s Constitution to impose any such requirements on out-of-province and non-Canadian businesses, with two related constitutional challenges currently working their way through the courts.
Background
In 2002, Manitoba passed legislation requiring businesses located outside of Manitoba that do “not otherwise carry on business in the province” to register for, charge, collect and remit Manitoba PST if they (i) cause goods to be delivered in Manitoba, (ii) solicit orders for goods in Manitoba, and (iii) accept orders that originate in Manitoba.
Now with its 2021 amendments, Manitoba — following the lead of British Columbia, Saskatchewan and Quebec — is attempting to expand its authority outside its provincial boundaries even further, in respect of the digital economy.
Nonresidents and residents of Canada
Under Manitoba’s 2021 amendments, anyone who operates an “online accommodation platform” or “online sales platform” must be registered for the purposes of collecting and remitting Manitoba’s PST. “Online accommodation platform” and “online sales platform” are defined in the amendments as online marketplaces that “enable or facilitate” (i) retail sales in the province, and (ii) the collection of payment.
Significantly for out-of-province and non-Canadian businesses, these registration requirements may be triggered even where the operator of the online platform:
- Does not sell goods to persons in Manitoba (but merely “enables or facilitates” sales made by “online sellers” or accommodation providers); and
- Does not carry on business in Manitoba.
In addition, Manitoba’s 2021 amendments expand the definition of a taxable “telecommunication service” under The Retail Sales Tax Act. The apparent intent of this expanded definition — along with further definitions added for “telecommunications” and “electronic device” — is to require streaming service providers to register for and collect PST.4 However, the complex interaction between these three definitions may also trigger registration requirements for other digital service providers.
Constitutionality
Section 92 of Canada’s Constitution Act, 1867 limits the legislative authority of each province to making laws in the particular province. As such, there remains a significant issue as to whether Manitoba and the other provinces in Canada that still administer their own PST (British Columbia, Saskatchewan and Quebec) have legislative authority to impose PST registration requirements on persons who do not carry on business in the province.
EY teams are aware of court cases challenging the constitutionality of British Columbia’s PST registration requirements and are monitoring the outcomes.
Learn more
For more information, please contact your EY or EY Law advisors or one of the following professionals:
East
Jadys Bourdelais
+1 514 879 6380 | jadys.bourdelais@ca.ey.com
West
David D. Robertson
+1 403 206 5474 | david.d.robertson@ca.ey.com
Thomas Brook
+1 403 826 7316 | thomas.brook@ca.ey.com
Scott Joly
+1 403 206 5604 | scott.joly@ca.ey.com
Central
Jan Pedder
+1 416 943 3509 | jan.s.pedder@ca.ey.com
Sania Ilahi
+1 416 941 1832 | sania.ilahi@ca.ey.com
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- Refer to EY Tax Alert 2021 Issue No. 05.
- Refer to EY Tax Alert 2019 Issue No. 32.
- As announced in the Manitoba budget; refer to EY Tax Alert 2021 Issue No. 17.
- As is set out in the explanatory notes to Bill 74. See also Manitoba’s Information Bulletin No. 121 (April 2021) https://www.gov.mb.ca/finance/taxation/pubs/bulletins/2021budget.pdf
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Budget information: For up-to-date information on the federal, provincial and territorial budgets, visit ey.com/ca/Budget.
