Plug-in hybrids and electric cars are about to get more expensive in BC. That's thanks to a change in how sales tax is calculated around the province's clean energy rebate.
Under British Columbia's Clean Energy Vehicle Program, buyers of a plug-in hybrid or fully electric vehicle are eligible for an incentive of up to $5,000, depending on the size of the battery of the vehicle. That part of the program isn't changing.
What is changing is the amount of provincial sales tax paid on the vehicle.
Previously, PST was charged on the price of the vehicle minus the rebate. So a car with a sale price of $60,000 that qualified for a $5,000 rebate would have PST charged on the $55,000 amount.
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Beginning December 1st, PST will be charged on the sale price before the rebate. In short, the buyer above would pay PST on the $60,000 sale price, and then have the rebate removed from the total.
That has a bigger impact than just the extra tax on the $5,000 amount. That's because BC's sales tax on vehicles is on a sliding scale. Vehicles with a purchase price under $55,000 are charged at seven percent, $55,000-$55,999 is eight percent, $56,000-56,999 is nine percent, and vehicles over $57,000 pay 10 percent.
That means that a buyer purchasing a vehicle about $57,000 could see their tax rate jump by up to three percent. A vehicle that cost $59,999 under the old plan would have had a $3,849.93 PST bill. Under the new rules, it's $5,999.90, a difference of over $2,000.
Not many vehicles currently bridge that worst-case gap, but all vehicles sold under the incentive will see their tax bills rise with the changes. So if you're on the fence over an EV in BC, acting quickly could save you thousands in tax.
The BC government didn't comment on the GST portion of the tax, but it should continue to be calculated on the after-incentive amount.