If your organization or supporters are purchasing items to donate to a charity, such as for a fundraising auction, it’s important to understand how Provincial Sales Tax (PST) applies. This can be a confusing area, so we’ve broken it down in plain terms.
PST Applies Twice: When Buying and Selling Donated Goods
Here’s the key takeaway: PST is charged both when a donor buys goods to donate, and again when the charity sells those goods.
1. When Someone Buys Goods to Donate
- Even if the item is being donated, the original buyer must pay PST because the purchase is considered for personal use (a donation counts as “using” the item).
2. When the Charity Sells the Donated Item
- If the charity later sells the item (e.g., in an auction or fundraiser), that sale is also subject to PST.
- The charity must charge PST to the buyer at the point of sale.
Special Rules for Auctions
If you’re selling donated goods at a fundraising auction:
- If the value of the item is at least 80% of what the buyer pays (e.g., value is $800 and the buyer pays $1,000), charge PST on the full price paid.
- If the value is less than 80% of the price paid (e.g., value is $750 and the buyer pays $1,000), charge PST only on the estimated value of the item.
How to Remit the PST
- If your charity is registered for PST, include it in your regular tax return.
- If not registered, you must submit the PST using form FIN 405 – Casual Remittance Return, and the payment is due by the end of the month following your event.
If you’re involved in organizing or supporting charitable events, it’s important to plan for PST in both the donation and resale of goods. If you have questions or need help determining how this applies to your situation, feel free to contact us!
