Property Sales Tax

Home » Legal and Accounting » Property Sales Tax

Is there Tax on Furniture Included in the Sale?

When buying a property in Whistler and furniture is included, Property Sales Tax (PST) is applicable. 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.

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. However, the value of the furniture has to be documented. The advantage to the buyer is that you do not pay the BC Provincial’s Property Transfer Tax (PTT) on the value of the furniture.

Many buyers want to pay as little as possible for the furniture in order to get financing. However, you don’t pay PTT on the furniture, and a mortgage will not cover PTT. Therefore, you need to do your sums before agreeing to the value of the furniture.

Value of Furniture

Sometimes the furniture is negotiated in the contract and value is placed on it. Or, once there is an accepted offer, an addendum to the contract of purchase and sale is prepared by the Buyer’s realtor. This addendum documents the value of the furniture, a value that is agreed to by the Buyer and the Seller. 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 addendum to the Contract of Purchase and Sale.

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 there is furniture included in the sale, this value is still determined and documented in the contract or addendum. 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 *PREC manderson@sutton.com (604) 938-3885