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Tax on construction labour in Saskatchewan may increase costs by up to 3.5%

When the Saskatchewan government imposed the provincial sales tax (PST) on previously exempt construction labour early this spring, BTY crunched the numbers to determine what the impact would be, on average, for overall costs on various types of construction projects.

The PST had previously applied only to material costs. But as of April 2017, new contracts for the repair, renovation or improvement of real property are subject to PST that applies to the total contract price to the purchaser.

In order to help our clients and industry partners determine how this change impacts project costs, we have included data from two examples below.

The first is a renovation project for a higher education facility with a gross floor area of 87,300 square-feet. The renovations comprised gutting the existing building interior of non-structural building components as well as some structural elements and provision of new modern architectural, mechanical, electrical and audio-visual systems. An upgrade to the thermal resistance of the building is also included to meet current National Energy Code standards. You can see the total project cost numbers noted for before and after the PST changes came into effect. With a total construction cost of $24.6 million, and factoring in an additional 3.01% increase due to the tax on construction labour, the final construction cost of the project now sits at $25.4 million. The cost per square-foot has increased from $282/sf to $291/sf.

The second is an addition of an elevator in a public institution building with a gross floor area of 540 square-feet. The addition comprised the removal of the existing elevator and installation of a new multi-stop passenger elevator. Scope included a new concrete block elevator shaft, concrete pit footings/walls, mechanical and electrical service installations, floor slab adjustments as well as ceiling and wall finishes. Here too, we see the cost increase of 2.3% putting the final construction cost at $480,500. The cost per square-foot has increased from $873/sf to $893/sf.

If you would like more information on how the tax changes impact various disciplines of construction costs, please reach out to us.