Defining the scope of software in a British Columbia PST audit.

A business was undergoing an audit by the British Columbia tax authorities. In earlier years, it had incurred significant information-technology expenditures with a foreign non-resident supplier that was not registered for British Columbia PST purposes.

A purchaser may be required to self-assess and remit PST directly when it acquires taxable software without being charged the tax. The auditor proposed to treat a broad range of technology expenditures as purchases of software and to assess a significant amount of PST that had not been self-assessed. The issue was which components actually fell within the applicable meaning of software.

Alexandre reviewed the nature of the expenditures and the treatment proposed during the audit. He argued that the scope of software was narrower than the auditor’s proposed approach and that genuine software acquisitions had to be distinguished from the other components of the technology project.

The representations substantially reduced the proposed assessment. The uncollected PST ultimately applied only to the subset of expenditures that actually met the meaning of software.

Purchasing software from a foreign supplier can create a PST self-assessment obligation. However, an expenditure does not become taxable software merely because it forms part of an information-technology project. A detailed review of each component can materially change the outcome of an audit.