Car dealerships are crying foul after the trade-in value of vehicles will no longer be exempt from Provincial Sales Tax (PST) in Saskatchewan after April 1.
“It’s really going to hurt your pocketbook if you trade-in a $60,000 vehicle and have to pay six per cent PST on that,” said Robert Mann, owner of Saskatoon Motor Products (SMP).
Previously, when a buyer traded in a $5,000 vehicle for a new $20,000 ride, PST would only be applied to the difference of $15,000.
With the new rules, buyers now pay the six per cent tax on the total $20,000.
The looming change has increased business at SMP since the provincial budget announcement on March 22.
On Tuesday, Mann said around 50 vehicles had been traded in, around double that of a typical week.
“People are starting to realize they need to do something now to save money before the change,” Mann said.
The owner called the change “unfair” to consumers.
Mann, who is also the chair of the Saskatchewan Automobile Dealers’ Association, said the organization is trying to meet with Premier Brad Wall or Finance Minister Kevin Doherty to rescind the decision.
“It’s not incentivizing for people who trade more often or want to trade at all,” he said.
Vehicle trade-in values are still exempt from the five per cent GST charged by the Federal Government.
‘Needed to expand tax base’
In an emailed statement, the Sask. government said it made “every effort” to control and reduce spending – while still providing quality services.
“But those efforts alone were not enough to deal with the resource revenue shortfall,” the statement read.
“We needed to expand the tax base, but to do so in a way that maintains our Saskatchewan advantage.”
The province stated the elimination of the trade-in allowance will provide an additional $19.2 million in revenue and provides sustainability to the used car exemption.
The full value for a used car purchase is still exempt from PST in Saskatchewan.
Additionally, the statement noted the entire purchase price of a new car is taxed in nearly every other jurisdiction in Canada.