PST Update: Government guidelines now available

July 12, 2006

The provincial government's Consumer Taxation Branch has now issued guidelines regarding the application of the BC Court of Appeal's decision in Christie v. British Columbia 2005 BCCA 631: see Legal Services Provided to British Columbians.

The guidelines, based on the decision, provide guidance to the profession as to which legal services fall within "the determination of rights and obligations by courts of law or independent administrative tribunals" and provide definitions of barristers' and solicitors' services, information about independent administrative tribunals and a list of frequently asked questions.

The government prepared these guidelines after seeking input from the Law Society about issues raised by members of the profession concerning the Christie decision. The Law Society believes these guidelines will be of considerable assistance to the profession.

On February 10, 2006, the BC Court of Appeal ruled on the form of the order in Christie v. British Columbia 2005 BCCA 631 (see: 2006 BCCA 59). That order declares that the tax on legal services is unconstitutional to the extent that it purports to tax legal services related to the determination of rights and obligations by courts of law or independent administrative tribunals.

The Supreme Court of Canada has granted leave to appeal this decision and the appeal is scheduled to be heard in March 2007.

Following an application for a stay of the decision pending resolution of the Supreme Court of Canada appeal (see: 2006 BCCA 120) and a subsequent application to vary the initial stay order (see: 2006 BCCA 241), lawyers are not required to collect tax from low income persons in respect of legal services related to the determination of rights and obligations by courts of law or independent administrative tribunals.

Lawyers are reminded that, unless the low-income exemption applies, they must continue to collect PST on legal services from clients and either hold the money in trust or remit it in accordance with the Court of Appeal's decision. Accordingly, lawyers should collect, but not remit tax on legal services that are related to the determination of rights and obligations by courts or independent administrative tribunals.

Lawyers should note that the Ministry of Small Business and Revenue interprets "low income" as meaning income within the Legal Services Society's eligibility guidelines as they existed on February 8, 2005 when the BC Supreme Court rendered the initial decision in Christie 2005 BCSC 122. Those financial guidelines and a statutory declaration to establish a client's income are available on the Ministry of Small Business and Revenue’s website.

The government has asked the Law Society to keep it informed of any issues raised by lawyers concerning the guidelines and intends to issue new or amended guidelines as necessary.

The Law Society and the Consumer Tax Branch continue to discuss the application of the BC Supreme Court's decision in Derek K. Miura Law Corporation v. Attorney General of BC 2005 BCSC 1569. That decision held that court awards and negotiated settlements should not be taken into account in determining whether a person meets the low-income criteria.

Please watch the Law Society’s website at www.lawsociety.bc.ca for further updates.