When and What Sales Taxes You Should Charge in Canada?

If you’ve purchased anything in your lifetime – a television set, a pair of shoes, or a coffee machine – you’ve had to pay sales tax. Remember when you bought that t-shirt from your favourite store? The price tag listed the item as $24.99, but the final price came to a higher amount. This is because the t-shirt was subject to sales tax. 

If you own a small business, sales tax is an essential part of your operations. But there are different kinds of sales tax and many rules and regulations outlined by the Canada Revenue Agency (CRA) that vary depending on the province the customer is buying, or how much revenue a business brings in annually. It’s important for business owners and consumers to understand how sales tax works so that they understand their purchases more, and avoid any problems with the CRA when tax time comes in March. Let’s take a look at the basics.

What Is Sales Tax? 

There are 3 different categories of sales tax in Canada: HST, GST, and PST/RST/QST. 

GST (Goods and Services Tax)

Goods and Services Tax, commonly known as  GST, is a federal (Canada-wide) sales tax charged on most purchasable goods and services in Canada. 

HST (Harmonized Sales Tax)

Harmonized Sales Tax, commonly known as HST, is a combination of GST and PST. Some provinces, known as “participating” provinces, decided to merge the two sales taxes together into one charge. Not all provinces have PST, however, so they would not charge HST. 

PST (Provincial Sales Tax)

Provincial sales tax, commonly known as PST, is a sales tax separate from, and not harmonized with GST. Rates vary, as you’ll see in the chart below, and not all provinces charge PST. British Columbia and Saskatchewan charge PST. Manitoba and Quebec also charge a provincial tax, but they are known as Retail Sales Tax (RST) and Quebec Sales Tax (QST), respectively. 

Click here to see how to create a business invoice. 

Sale Tax Rules

Sales taxes apply to most goods and services offered by a Canadian business. It’s important to note that the amount of sales tax charged is based on the location of the customer, not the business. For example, if a clothing store in Manitoba ships an item to Ontario, the customer would pay Ontario sales tax (13% HST). However, there are some exceptions. Sales tax isn’t applied to the following types of goods and services:

• Basic Groceries (taxed at a rate of 0%, also known as Zero-Rated Sales Tax)
• Home and Auto Insurance
• Public Transit
• Child Care

Note: PST exemptions tend to vary depending on what province you are in. Make sure to check government websites for more information on PST exemptions. 

Exempt Groups

There are some groups of people that are exempt from paying taxes. Generally, the following groups are exempt:

• Indigenous peoples
• Government Officials
• Diplomats

Sales Taxes By Province

Sales tax rates vary by province. Refer to the chart below for individual province tax rates. 

Collecting and Remitting Sales Tax

When Must You Collect Sales Tax? 

Most small businesses operating in Canada must collect sales tax. However, there are a few exemptions. You do not need to charge or collect sales tax if any of the following criteria are met:

• You are a small supplier, meaning your annual sales of taxable goods and services fall under $30,000 per year
• You sell zero-rated items (groceries), or other goods and services exempt from sales tax

If your sales of taxable goods and services exceed $30,000 per year, you must collect sales tax and remit it, or pay it, to the CRA.  

Find out what’s the difference between a tax credit and a tax deduction in Canada. 

Registering for a Sales Tax Account

To charge and file sales tax with the government, you first need to register for a sales tax account. There are many ways to register, including by phone, mail, fax, or online. The type of sales tax account that you will register for generally depends on the province in which you are selling your goods and services:

• GST/HST (Most provinces): the Government of Canada’s website. 
• QST (Québec): Revenu Québec.  
• RST (Manitoba): TAXcess.
• PST (British Columbia): eTaxBC. 
• PST (Saskatchewan): Saskatchewan eTax Services

Remit (Pay) Sales Tax through CRA

You are responsible for keeping the sales tax you have collected and charged until it’s time to remit it or pay it to the CRA. Filing taxes can be complicated if you aren’t organized. That’s why it’s important to have strong recordkeeping practices in place to ensure you are on top of your tax obligations. 

You can usually pay your sales tax to the CRA electronically, by mail, or through your bank. Below, you’ll see that different provinces have different instructions for filing sales tax:

GST/HST: If you have collected GST/HST, you are responsible for holding onto it until paying it back to the CRA. To remit this sales tax, you must:

• complete and file a GST/HST Return
• remit (pay) the net amount of GST/HST

QST (Quebec): If you charge QST in Quebec, you’ll need to file a QST return every reporting period, regardless of if you owe QST. For more information, visit Revenu Québec. 

RST (Manitoba): If you charge PST in Manitoba, you must report collected RST consistently, with the frequency depending on how much RST you charge each month. Visit the Government of Manitoba’s website for more details. 

PST (British Columbia): If you charge PST for customers in B.C, you must remit all PST charged, whether you have received the tax from customers or not. Visit eTaxBC to learn more. 

PST (Saskatchewan): If you charge PST in Saskatchewan, you need to file a PST return regularly (monthly, quarterly, or annually) depending on how much tax you collect. For more information, visit the Government of Saskatchewan’s website.

Final Thoughts

There are many rules around sales tax in each province, and it could be intimidating when you first begin. But with a bit of review and research, charging and remitting sales tax can be a breeze. Make sure to familiarize yourself with the sales tax information relevant to your province. With good recordkeeping and research, as well as reviewing this article and the CRA’s website for more information, you’ll be comfortably charging and remitting your sales tax in no time.