Editor’s note:
On October 5, the B.C. government announced it would delay the planned expansion of the PST to professional services—which had been scheduled to take effect October 1—citing ongoing international trade disruptions and economic uncertainty.
“There’s a time to stay the course and there’s a time to adjust. This is a time to adjust,” Premier David Eby said, adding that the delay would give businesses “some breathing room” as they contend with tariffs and seek new markets.
The province estimates the delay will save people, businesses and local governments approximately $260 million in 2026-27. Finance Minister Josie Osborne said pausing the expansion would “protect jobs” and give businesses and communities more flexibility to invest, adapt and grow.
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Paula Lindner has spent a decade turning a neighbourhood yarn shop into something more than a place to buy wool. At Baaad Anna’s Yarn Store in Vancouver’s Hastings-Sunrise neighbourhood, customers come to knit, mend and build community—a business model that has helped the woman-owned shop weather COVID-19 and an increasingly difficult retail economy. But with the proposition of B.C.’s expanded provincial sales tax, Lindner worries that the next challenge could be the one many small businesses don’t survive.
For decades, B.C.’s PST has largely applied to things you could buy off a shelf.
Beginning in October, the province was set to expand the 7 percent PST beyond physical goods to include a range of professional services for the first time (Editor’s note: On Oct. 5, the province announced it would delay the planned expansion amid ongoing international trade disruptions and economic uncertainty). That means businesses would pay PST on services including accounting, bookkeeping, security, property management and commercial real estate commissions, while architectural and engineering services would also become partially taxable. Unlike the GST, which many businesses can recover through input tax credits, the PST generally becomes an added cost of doing business—one that companies often pass on through higher prices, leaving consumers to shoulder much of the bill.
The plan to expand the PST has drawn widespread opposition from small businesses, where the increased costs could prove the difference between staying afloat and shutting down. In a survey of almost 500 B.C. business owners by the Canadian Federation of Independent Business this spring, 80 percent opposed expanding the PST to professional services, while nearly three-quarters said they expected to pass on at least some of the cost to customers. Accounting and bookkeeping services emerged as the biggest concern, with 88 percent of respondents saying the change would negatively affect their business.
For Baaad Anna’s, the ripple effects are twofold. Nearly 80 percent of the products on its shelves—mostly yarn and fibre—would become subject to PST for the first time as the province removes tax exemptions on clothing repair materials, making almost every project more expensive for customers. Lindner would also begin paying PST on business services like bookkeeping and accounting. She says neither change exists in isolation—they come as consumers are already pulling back on discretionary spending. “The numbers are so thin already on a number of small businesses that it’s just going to push them over the edge of not being able to survive,” Lindner notes.
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For years, British Columbia’s small businesses have been pushed to the brink by mounting costs and what they feel is inadequate government support. Consumer spending has softened as households grapple with rising living costs, while tariffs and global geopolitical uncertainty have driven up the price of everything from inventory to transportation. Even as some downtown businesses have seen a boost from FIFA-related tourism, many entrepreneurs say they’re still struggling to regain their footing after years of economic turbulence. Adding another cost now, says Bridgitte Anderson, president and CEO of the Greater Vancouver Board of Trade, is moving in the wrong direction. “We should be doing everything we can to be more competitive, to attract more investment and to create more jobs,” she urges.
The concerns extend well beyond Main Street retailers. The Field Collective, founded in 2023 to support and amplify the voices of small architecture practices in B.C., represents about 20 firms, ranging from sole practitioners to studios with as many as 10 employees; most have teams of just two to four. These firms are already contending with fewer housing projects, rising regulatory costs and tighter margins. Now, they fear the PST expansion could make it even harder for licensed emerging practices to compete with unlicensed ones and secure the smaller projects on which they depend. “I worry that new and emerging architecture firms will not have the work to support their businesses, or the environment that we create becomes so cumbersome that good architects abandon the industry,” says Erik van der Putten, membership chair of the Field Collective and partner at emerging architecture firm WNDR Architecture and Design.
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Consider a $100,000 architectural fee for a multiplex project. Under the new rules, the client would continue paying 5 percent GST but would also pay an effective 2.1 percent PST (the province is taxing 30 percent of architectural fees at the 7 percent PST rate). That adds another $2,100 to the bill. A client hiring an unlicensed designer, by contrast, may only need to pay the GST. Van der Putten worries the difference will encourage some clients to choose lower-cost, unregulated alternatives over architects, who are required to carry professional liability insurance, meet continuing education requirements and follow a code of ethics and are legally obligated to uphold the public interest. “Every opportunity to save costs is explored whenever an opportunity arises, no matter how big or small,” he says. “A dollar will be saved anywhere it can be.”
In the province’s defence, the changes are intended to modernize—not dramatically expand—B.C.’s tax system. Since the PST was introduced in 1948, the economy has shifted from one driven primarily by goods to one increasingly centred on services, many of which have remained untaxed. The Ministry of Finance says applying the PST to a limited number of professional services will “bring B.C. in line with other provinces and generate funds for services people need, including health care and K-12 education.”
In a statement to BCBusiness, Finance Minister Brenda Bailey said the government recognizes the pressures facing businesses but maintains the province remains competitive. “We have the lowest personal income taxes for people earning up to $149,000, and with the PST changes, B.C. continues to have the narrowest sales tax base of all sales taxes in Canada.” Bailey added that the PST expansion is part of a broader package of business measures, pointing to a new 15 percent manufacturing investment tax credit, a $400-million strategic investment fund, expanded access to the small-business tax rate, higher employer health tax exemptions, increased venture capital tax credits, lower wholesale liquor prices for restaurants and the continuation of several small-business tax measures following the repeal of the carbon tax.
Business groups, however, reject the province’s argument that the changes simply bring B.C. in line with the rest of Canada. Bridgitte Anderson of GVBOT argues the comparison overlooks a key distinction: unlike the GST and value-added provincial sales taxes in provinces such as Ontario and Quebec, B.C.’s PST generally cannot be recovered by businesses. “About 90 percent of the country either doesn’t have a sales tax, or can get the sales tax refunded,” Anderson says. “British Columbia is not in line with other provinces, and the provinces that we compete most with, Ontario, Quebec and Alberta, in fact, have the competitive advantage now.”
That argument forms the basis of her organization’s Stop the Squeeze campaign, launched in May to pressure the province to reverse the tax. The campaign contends the PST expansion amounts to a “tax on a tax” because businesses generally cannot recover the added cost, forcing it into project budgets before it is ultimately passed on to consumers through higher prices for housing, infrastructure and everyday goods and services. The Board of Trade also argues that the measure is unnecessary, noting that provincial revenues have grown 48 percent since 2020, and Budget 2026 introduces more than $4 billion in new business taxes. GVBOT also points out that only 4 percent of small-business owners say they feel the provincial government is on their side, and nearly half of British Columbians view the PST expansion as unfair.
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“They’ve told us the same thing—that it is about updating the tax regime,” says Patricia Barnes, board member and vice chair of Business Improvement Areas of B.C., which represents more than 55,000 small- and medium-sized businesses across 80 business improvement areas in the province. “The problem is, for us, this particular business environment is not a good environment to be doing that in right now. Our businesses are struggling, and adding PST may seem nominal to them, but it is a cumulative impact of all the fees and taxes that they’re facing, in addition to the uncertainty in the economy.”
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Many businesses, says Barnes, who is also executive director of the Hastings North Business Improvement Association, have already been forced to spend more on security to protect their staff, customers and property. “They have to protect those things, and to then have to pay PST on top of all those additional costs… it’s like an insult, almost,” Barnes says. “You’re being told to do all this, and you are trying your best, and nothing’s improving, and now you’re going to be charged an extra cost for trying to do your best.”
Barnes also rejects the idea that businesses can simply pass the added costs on to consumers. After years of inflation, higher borrowing costs and economic uncertainty, she says, many small businesses have already raised prices as much as they can. “Consumers are risk averse; they don’t have as much discretionary income—they’re making hard choices.” When businesses can’t fully recover higher costs, Barnes says, owners often absorb the hit themselves. “The people that get impacted, especially in small business, are the owners, because they don’t get the take-home—they’re putting themselves and their families at risk.”
Neither Barnes nor Anderson disputes that the province faces a difficult fiscal reality. Both acknowledge that the government needs to close budget gaps—but they question whether taxing essential business services is the right way to do it.
Notably, in August, the Select Standing Committee on Finance and Government Services—one of 11 permanent parliamentary committees of B.C.’s Legislative Assembly—recommended in its 2027 budget consultation that the province repeal the PST altogether “to simplify and streamline taxation systems.”
Anderson offers economic growth as the better solution. She points to the Greater Vancouver Board of Trade’s “3% Challenge”—an advocacy campaign calling on the province to target 3 percent annual economic growth—arguing it would generate additional government revenue while creating jobs. She adds that the province’s Look West strategy and its pipeline of more than $230 billion in major projects presents an opportunity to do just that—but only if government accelerates permitting and gets projects built. “We need the government to be in line with the needs of the business community, and to think about how to grow the economy, which will grow revenue,” she says.
