Encyclopedia
Provincial Sales Tax (PST) clearance certificate
A certificate from the Province confirming a seller of a business has no outstanding PST. Buyers can request it to avoid inheriting liability.
For example: A buyer requests a clearance certificate before closing. (Illustration only, not a real deal.)
Official source: Provincial sales tax (Government of BC)
Example only, not a real client. Say you are buying a business that sells taxable goods. You ask the seller for a clearance from the province confirming no PST is owing, so you are not left responsible for the seller’s unpaid tax.
What I’d tell a friend
When buying a business, ask your lawyer about provincial sales tax clearance before closing.
Why it matters to you
If the seller owes PST and the buyer doesn't get a clearance, the buyer may end up paying it. In a business purchase it's one of the documents to ask for well before closing.
How to use it in your deal
Buyers of a business or its assets should request the certificate early and make it a closing condition, or hold back enough of the purchase price until it arrives. Ask your lawyer about timing, since processing can take time. Sellers should file and pay all PST returns before applying, and apply well before closing to avoid delays.
Real property alone isn't usually subject to PST, but equipment, furniture and inventory sold with a building or business can be. Landlords taking over a tenant's equipment, for example after a default, should also think about PST.
Get tax advice when a deal mixes land, buildings and business assets, since Goods and Services Tax (GST), PST and property transfer tax may each apply to different parts. Ask the seller for it early, since the province can take time to issue it.
Mistakes I see
Closing without a certificate or holdback. Applying too late. Forgetting PST on equipment sold with a building.
In BC and Vancouver
The Provincial Sales Tax Act sets the rules and buyer liability; the province publishes guidance on clearance certificates.
Official sources: Provincial sales tax (Government of BC) · PST bulletins and publications (Government of BC)
What it is
A PST clearance is confirmation from the BC government that a business has no outstanding provincial sales tax.
Buyers of business assets may face liability for unpaid PST without it.
What to do
Ask your lawyer to include a clearance requirement in the contract.
Allow time to get it before closing, and ask about other clearances that may apply.
Questions to ask before you sign
- Has the seller applied for a clearance certificate?
- Is there a holdback?
- What assets are subject to PST?
- Who pays PST on equipment?
Keep reading
Related terms: Holdback, Asset sale
Working through this right now? Questions are free. Book a 15-minute call or call or text 604 256 2002, and I’ll give you a straight answer.
Back to the A–Z index · common questions · tactics to watch for · the shorter glossary
General information for British Columbia only. It isn’t legal, tax, accounting or financial advice, laws and rates change, and reading it doesn’t make you my client. Any numbers or scenarios are hypothetical. Check the linked official source and talk to a lawyer, accountant or other qualified professional before you act or sign anything. See the terms and disclaimer.