Most used cars in Saskatchewan are now subject to six per cent provincial sales tax, fixing what the new-vehicle dealers association there called “a horrible system.”
The provincial government removed the previous tax exemption for used vehicles as part of its 2018-19 budget unveiled earlier this week. The application of sales tax begins today.
Saskatchewan’s tax treatment on used light vehicles is now aligned with every other jurisdiction that applies a sales tax in the country.
Maurice Plemel, the government relations chair with the Saskatchewan Auto Dealers Association, says the news doesn’t come as a surprise and that he and his fellow members “almost unanimously” applaud the change.
“The government was leaving huge dollars on the table that other jurisdictions in the country were collecting. We as dealers knew they weren’t going to be able to maintain this. It was going to come back at some point in time,” he said.
In addition to the application of sales tax, the government also reinstated the trade-in allowance, which allows a deduction for the value of a trade-in when determining PST, so PST will only be paid on the difference in price between the trade-in vehicle and the purchased vehicle.
Plemel said it was previously very difficult to explain PST rules on trade-in allowances to customers. He said trade-ins will now be easier to understand, and that there will be less administration involved.
“It was a horrible system,” he said. “To administer that system was a nightmare. We couldn’t get the customers to understand it, and no leasing or software company knew how to handle it. Tax on down payments, tax on trade-ins, how do you calculate it? It was a mess.”
Plemet said under the previous system, in order to keep customers happy, they had to offer more trade-in allowance for used cars because people buying new cars were being fully taxed on new vehicles.
“We had used vehicles we could only sell in Saskatchewan,” he said.
Plemet said it’s not uncommon for people living on the Prairies to drive hundreds of kilometres into neighbouring provinces to find better deals.
“We asked for and talked about getting back to applying tax all the way through [the process], the same as every other jurisdiction. And the Saskatchewan government saw the light,” Plemet said.
Also under the new rules, PST will not be applied to the private sale of used vehicles with a purchase price of up to $5,000. Private sales of used vehicles registered for commercial use, as well as dealer sales of used vehicles, are not eligible for the $5,000 exemption.
And PST will not be charged for used vehicles gifted between qualifying family members – spouses, parents or legal guardians, children, grandparents, grandchildren or siblings.