Ask which exemption is being considered
B.C. has specific rules for goods acquired for resale and a separate production machinery and equipment exemption. Eligibility and evidence matter; neither is a general exemption for everything a manufacturer purchases. Use the applicable current guidance and retain the basis for the decision.
GST input tax credits require their own eligibility and documentation review. PST paid is not a GST credit. Recoverable tax and non-recoverable cost should be distinguished when the accountant applies the inventory or asset policy.
Illustrative example: an ordinary office purchase
Assume a Burnaby manufacturer buys a $2,000 office item subject to ordinary 5% GST and 7% PST, with no exemption or special rule. The invoice is $2,240: $2,000 price, $100 GST and $140 PST.
The purchase record identifies the office purpose instead of applying an exemption intended for a different production use. Any GST credit claim depends on the actual eligibility and evidence. The illustration is a tax split, not a determination of how the item must be expensed or capitalized.
Retain the exemption and use evidence
For a purchase claimed exempt, keep the invoice, item description, intended use and required supporting information or certificate. Confirm the documentation needed at the time of sale under the relevant rules. A supplier’s willingness to omit PST does not independently prove the purchaser qualifies.
Where a bill combines categories, identify the lines covered by each treatment. A single account code for the whole vendor can conceal purchases that do not meet the same conditions.
Review changes after the purchase
Changed use, returned goods, supplier credits or an altered production process may need further review. Keep those events connected to the original purchase instead of treating them as unrelated adjustments. The operational team should explain actual use where it affects the analysis.
At month end, reconcile purchase-tax records to the ledger and list uncertain items for the responsible adviser. Clear documentation allows the business to assess legitimate exemptions without extending them to unrelated spending. It also helps explain why two machines or two purchases from the same supplier might receive different treatment.
Put this into practice
Sources and current guidance
A practical next step
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