SCRAP THE 2026 PST EXPANSION ON PROFESSIONAL AND COMMERCIAL SERVICES (2026)

Issue

Budget 2026 proposes to expand B.C.’s Provincial Sales Tax (PST) to a wide range of professional and commercial services adding non‑refundable costs that cascade through supply chains, raise prices, and erode competitiveness. The B.C. Chamber members have supported a made-in-B.C. value added tax.[1] This expansion of the PST runs counter to that policy and makes B.C. less competitive.

Background

Budget 2026 is framed by an increasingly precarious fiscal environment, with the province projecting deficits totaling nearly $37 billion over three years and planning to add $80 billion to the provincial debt within the same period. Revenues to government are up nearly 40% in the past 5 years alone, but spending has been growing much faster. The debt is now growing 2.5 times faster than the economy, pushing B.C.’s debt‑to‑GDP ratio to double by the end of the fiscal plan. Meanwhile, the annual cost of servicing the debt is set to more than double to nearly $9 billion by 2028/29, crowding out resources needed for core public services and economic growth initiatives.[2]

In addition to forecasting a deficit of $13.3 billion, Budget 2026 proposes to extend PST to services including accounting and bookkeeping; security and private investigation; rental property/strata management and non‑residential real estate commissions. It also applies PST to 30% of architectural, engineering, and geoscience (AEG) fees, an effective 2.1%. The change is slated to begin October 1, 2026.

PST is administered by each province’s tax authority. Unlike GST/HST, PST is not a value added tax (VAT) (it is a retail sales tax) and is not recoverable. Therefore, any PST paid on purchases by a business cannot generally be claimed as an input tax credit or refund and becomes a cost of business input.[3]

The introduction of PST on professional and commercial services will have significant negative effects on competitiveness, affordability, and economic prosperity, including:

• Cascading “tax on tax” – Unlike the federal GST/HST (which offers input tax credits), B.C.’s PST is not refundable for businesses. Taxing intermediate services embeds costs into projects at each stage, then taxes the result again. This leads to a tax on tax for many products and services. 
• Administrative burden – Thousands of firms that never collected PST will have to register, re‑price engagements, and remit under a separate regime. This expansion adds cost and compliance complexity for all businesses, but especially for SMEs, as small businesses spend more time complying with government regulations per employee.[4] A PST expansion will add a significant administrative burden for thousands of professional services‑ firms and their clients. These costs are estimated at up to $7,000 per year per employee.[5]
• Hurts competitiveness and investment – The expansion will raise input costs, slow capital decisions, and discourage investment. Alberta has no PST; other provinces such as Ontario and Quebec have value added sales taxes that ensure business and capital inputs are refundable.  Adding PST to professional service inputs widens B.C.’s cost gap relative to peers

Sectoral Impacts of the PST Expansion in B.C.

The sectoral impacts of the PST expansion are broad and substantial. In the development sector, for example, the PST on design/AEG inputs adds material costs to already fragile pro‑forma economics; the Urban Development Institute has reported estimates such as $275,000 to construction costs and $20,000 in annual operating expenses for a typical 300‑ unit rental‑ building.[6]

For natural resource sectors like mining, the added costs are also significant: an estimate for a junior mining company in B.C. adds costs of about $1.3 million to a project over the next three years, while an operational mine calculated the additional added costs on engineering and geoscience services at $3.7 million in a year, according to the Mining Association of B.C.[7]

The impact of PST will be felt also on commercial main streets and downtowns, as this expansion impacts property/strata management and non-residential brokerage commissions, leading to increased operating costs and rents for local retailers and office tenants already contending with elevated vacancies and slower leasing.[8] This is in addition to the PST applied to security services, raising monthly operating expenses for businesses that are already paying for guards and vandalism mitigation—working at cross purposes with small business security rebates introduced in recent years. This is charging businesses an additional 7% tax to protect their staff, property, and customers from vandalism, threats, and extortion.

Moving Towards a Made-in-B.C. Value Added Tax

The BC Chamber of Commerce has supported a made-in-B.C. VAT, as B.C. is one of only three jurisdictions in Canada that use PST and does not have a value-added sales tax in place.[9] Transitioning from PST to a VAT in B.C. would make the province more competitive on a national and international scale, lead to the creation of more jobs, and invest in local innovation.[10]

The Chamber Recommends

That the Provincial Government:

1. Eliminate the proposed PST expansion on professional and commercial services in Budget 2026 before the October 1, 2026, implementation date.
2. Move towards a Made-In-B.C. value added tax.