Does a Buyer Pay Extra for Inventory When Buying a BC Business?
This answer covers the law of British Columbia.
Sometimes, but it depends on what your agreement says. In a BC asset sale, inventory is one of the assets being bought, so the contract decides whether it is included in the headline price or counted and paid for separately at closing. Tax and lender claims shape how it is handled.
On an asset purchase the price must be allocated to each asset at fair market value, with the remaining balance attributed to goodwill, and the allocation should match what the vendor reports. Inventory is non-taxable for PST on an asset sale, and it is exempt if the buyer gives a PST number or a Certificate of Exemption – General (FIN 490). Parties cannot raise the goodwill price and lower the taxable-asset prices to avoid PST.
Inventory also carries risk. Buying more than 90% of a collector's inventory in B.C. is a PST bulk transaction, and without a clearance certificate the buyer is liable for the seller's outstanding amount. A lender's registration against inventory can rank ahead of your claim, so a Personal Property Registry search is worth doing. Ask a lawyer or accountant how to word the count and adjustment.
Key takeaways
- Whether inventory is inside the headline price or paid separately at closing is set by your contract, so the wording on the count and any adjustment matters.
- The price must be allocated to each asset at fair market value, with the remaining balance attributed to goodwill, and the allocation should match what the vendor reports.
- Inventory is non-taxable for PST on an asset sale, and it is exempt if the buyer gives a PST number or a Certificate of Exemption – General (FIN 490).
- Buying more than 90% of a collector's inventory in B.C. is a PST bulk transaction, and a prior lender's registration against inventory can rank ahead of your claim.