Is there Tax on Furniture Included in the Sale?
When buying a property in Whistler and furniture is included, Provincial Sales Tax (PST) is applicable on the value of the furniture. I have this on the authority of a Race and Company lawyer. This 7% PST is charged on used furniture and has to be accounted for. This tax will be of most concern to the buyer who is financing the purchase as the mortgage company will not finance furniture. However, like everything else in financing…it depends.
Is the Furniture Included?
One of the benefits of buying a holiday home is that the owner will typically want to leave all the furniture. When a property is listed with furniture included, buyers usually perceive this furniture as a sort of gift from the seller. Although the listing says furniture included, it is not until the negotiation starts that the Buyer will find out what the seller meant by “furniture included”.
Financed or Not Financed
The Government is looking for 7% of the value of all furniture included in the transaction. Therefore at what point is this value determined? If the value of the furniture is not documented in the Contract of Purchase and Sale, then the lawyer representing the Buyer, who is also preparing the Statement of Adjustments may ask for an amendment to the contract. It is then back to the Buyer’s realtor to negotiate with the Seller’s realtor a value as determined by the Seller and the Buyer.
There is an advantage to removing the value of the furniture from the sale price. The Buyer does not pay the BC Provincial’s Property Transfer Tax (PTT) on the value of the furniture.
Value of Furniture
If the offer included furniture and the borrower was asking for 80% financing then that would be an issue. The bank would ask the appraiser to deduct the value of the furniture from the value of the house. The mortgage company will not finance furniture at a high level of financing. However, the cut-off for the furniture depends on each bank and how much the Buyer is contributing.
When the Buyer is paying a significant portion and applying for minimal financing, then the furniture is left with the house. The contract would reflect that the furniture is remaining in the house for convenience purposes only and does not hold any value toward the purchase. However, although that might satisfy the mortgage company, will that satisfy the Buyer’s lawyer and the Provincial Government?
For example:
- You have an accepted offer of $3,000,000 on the house.
- The furniture included in the house has an agreed value of $20,000.
- This value of $20,000 is documented in the Contract of Purchase and Sale or as an amendment to the contract.
Financing
The mortgage company will not finance furniture. Therefore if the furniture was included in the sold price this money has to be adjusted or deducted from the sale price. Sticking with the same example:
- With a deduction for furniture of $20,000, the financing company deems the value of the house at $2,980,000
- You still pay the seller $3,000,000.
- The buyer has to come up with cash for the $20,000.
- Calculate the $20,000 at 7% PST = $1,400.
- $1,400 PST is due to the government of Canada which is looking to collect it from the buyer.
Submitting PST
When financing is not required and furniture included in the sale, this value is still determined and documented in the contract or amendment. When calculating the Statement of Adjustment, your lawyer will advise you that PST at 7% is due.
However, the lawyers are not required to submit a report to the Government. In essence, it is up to you whether your conscience will let you skip paying the PST. Apparently, the worst that can happen is you get audited, receive a letter demanding payment for the PST, and then you pay up.
It’s A Good Life in Whistler!
Marion
Marion Anderson Personal Real Estate Corporation
marion@WhistlerSkiinSkiout.com (604) 938-3885