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CLOUD SERVICES & PROVINCIAL SALES TAX

A CLEARER FORECAST IN MANITOBA & WESTERN CANADA

It only got a single line in Manitoba’s 2025 budget - unlike housing measures that came with charts and headlines - but the new provincial sales tax on cloud services could bring just as much fiscal weight.  As part of its 2025 budget, Manitoba announced it will apply its 7% Provincial Sales Tax (“PST”) to Software as a Service (“SaaS”), Platform as a Service (“PaaS”), and Infrastructure as a Service (“IaaS”), starting January 1, 2026. 

Manitoba is the latest to adopt this trend, following BC (which we wrote about here) and Saskatchewan*. The message across Western Canada is clear: cloud services are in the “net tax”!

BC and Saskatchewan – Setting the Stage

BC was the first to expressly address this issue.  In response to BC Supreme Court decision in Hootsuite Inc. v. British Columbia (Finance) case, the 2024 BC budget introduced legislative amendments to the BC Provincial Sales Tax Act, explicitly including SaaS, IaaS, and Application Programming Interfaces (“APIs”) within the definition of “software”. These changes were made retroactive to April 1, 2013, effectively overriding the BC Supreme Court’s decision and broadening the tax base to encompass a wider range of digital services.

Saskatchewan also appears to have extended PST to cloud computing services.  The province's Ministry of Finance revised PST Bulletin 7 in May 2024, indicating that PST applies to SaaS, PaaS, and IaaS when these services are consumed or used in Saskatchewan.  Providers of SaaS, PaaS and IaaS solutions located in Saskatchewan are required to pay the applicable PST on taxable computer hardware, software and services acquired for their own use or for use in providing their services. 

Manitoba Follows Suit

As announced in its 2025 budget and detailed in a new bulletin, Manitoba will begin applying its 7% Retail Sales Tax (“RST”) to SaaS, PaaS, and IaaS effective January 1, 2026.

The definitions and treatment are very similar to that set out in Saskatchewan’s PST Bulletin 7:

• SaaS: the provision of ready-to-use software applications over the internet, with the provider managing all aspects of the software, including infrastructure, application, and data.
• PaaS: the provision of hardware and software resources to develop applications through the cloud.
• IaaS: the provision of on-demand infrastructure via the cloud, such as compute, processing, storage, networking, and virtualization.

RST applies when these services are consumed in Manitoba. Resident and non-resident providers must collect RST, and Manitoba-based providers must self-assess RST on inputs like software and hardware used to deliver these services.

Takeaways

Manitoba has followed the trend in Western Canada, extending PST to cloud services like SaaS, PaaS, and IaaS.  Participants in the cloud computing sector should be aware of this change and assess whether they must charge tax, and determine if registration is required in the affected provinces.  A thorough analysis of the impact is essential, and tailored legal advice is needed to navigate the complexities and ensure compliance. 

For help with a PST issue, click here.

Download a PDF copy of this Blog here.

* Saskatchewan has issued only administrative guidance, with no legislative amendments – leaving some ambiguity about how the province can implement the changes listed in Bulletin 7.