Provincial sales tax clearance certificate

A buyer meets this when buying a business whose seller collects provincial sales tax. The aim is to keep a seller’s unpaid sales tax from becoming the buyer’s problem. This entry covers British Columbia only; check the rules in the province where the business is.

How it works in British Columbia

British Columbia’s PST guidance on buying and selling a business says a purchaser should have a clearance certificate issued by the province before buying a business. It says the certificate confirms the collector (the seller) has paid all outstanding PST and related penalties and interest up to the date the certificate was issued. It also says that if the purchaser does not obtain one, the purchaser is liable for an amount equal to any outstanding amount owed by the collector. The Provincial Sales Tax Act refers to a certificate required for a bulk transaction. The collector can apply for copies, and the purchaser may, with the collector’s consent, request a copy directly.

What to check or ask

• Does the province where the business operates charge its own sales tax, and what does its law say about buyers?
• Will the agreement make delivery of the certificate a condition of closing?
• Does the certificate cover the date you close, since it speaks only to a date?

For the wider question, see whether a buyer is liable for a seller’s unpaid provincial sales tax. The federal counterpart is the CRA clearance certificate.