Last month I told you about an Alberta company that took on some new work hauling specialized oilfield equipment from Slave Lake, Alta., to Prince Rupert, B.C. When the fleet manager calculated the cost to do the job, he overlooked a key detail: having to pay nearly $70,000 in provincial sales tax to British Columbia on the million-dollar trailing rig his company used during the move.
If you’re based outside of B.C., there are rules for collecting sales tax on vehicles that come into the province for “temporary use.”
In most cases, a vehicle is exempt from B.C. PST if the number of days is five or less. The days can be consecutive or spread out, but failure to pay could trigger a tax assessment plus a penalty and interest on the amount owing.
Instead of paying for single trip permits and PST on equipment (and related supplies and repairs), this fleet could decide to license vehicles under the International Registration Plan (IRP). Alberta would collect license fees and taxes and forward the proper amounts to other IRP jurisdictions, including B.C., according to the proportion of distance travelled there. Sounds like better approach.
Permit or prorate?
Now let’s switch it around. What if you’re based in B.C. and operate in B.C. and Alberta? Should you permit or prorate?
That’s what an owner/operator asked me after seeing last month’s column. He’s licensed to a carrier with offices in both Alberta and British Columbia and wondered whether it would be better to keep buying trip permits or register his truck as a Multi-Jurisdictional Vehicle in B.C. and prorate his licensing under IRP.
His truck has a B.C. base plate for 34,000 kg GVW ($1,751 a year) and his monthly trip permits to operate in Alberta cost $115 each, so his bill for plates and permits is $3,131 a year. He also paid $10,500 (or so) in sales tax when he bought his truck in 2007.
The fleet he’s registered to runs roughly 25% of its distance in B.C. and 75% in Alberta.
Given those percentages, if he were to license under IRP, he’d pay $2,078 in license fees ($1,039 to Alberta and $440 to B.C.) plus $600 in sales tax.
All told, he’s paying $1,053 more per year to use a B.C. base plate and trip permits.
That’s a huge amount of money. Under IRP, he would also be exempt from paying sales tax on any parts and repairs he puts into his truck, including tires.
He doesn’t pull his own trailer, but if he did, he would be exempt from sales tax on the purchase price plus all parts and repairs on that as well. He’d also have the flexibility to operate in the 57 other IRP-member jurisdictions besides Alberta and B.C. whenever he needed to.
And another thing: this owner/operator doesn’t have an IFTA decal, either. Let’s say he buys all of his fuel in B.C. at 20 cents/litre fuel tax vs nine cents in Alberta. He isn’t getting the benefit of 75% Alberta fuel consumption rates. That’s another chunk of change.
Run your own numbers
The best part about this whole story is that the owner/operator spoke up. He asked how the “permit or prorate” question applies to his specific business. He had solid real-world data to work with.
Every fleet is different. Your decision to use trip permits or register vehicles under IRP depends on a lot of factors.
Start by tallying up how much distance your vehicles cover in each jurisdiction, how many days your equipment will spend there, how much you spend on permits, and how much sales tax you paid on your equipment. If you need help, ask a fleet tax pro.
Whether you’re based in Alberta, B.C., or Timbuktu, understanding vehicle licensing and taxes is always easier when you’re working with your own figures. After all, it’s you paying the bill.
Sandy Johnson is the founder and managing director at North Star Fleet Solutions in Calgary. The company provides vehicle tax and license compliance services and also GPS-based fleet management solutions from Verizon NetworkFleet. She can be reached at 877-860-8025 or northstarfleet.com.