Many items you buy require sales tax to be added to the final price tag, but did you know that the sales tax you pay depends on where you live? Different provinces and territories have their own type of sales taxes and rates applicable to goods and services.
Read on to find out the various types of sales taxes across Canada and their respective rates.
What Is Sales Tax In Canada?
Sales tax is a type of tax that consumers pay to the government when purchasing goods and services at the point of purchase. They can be broken down into GST, PST, and HST.
What Is GST?
Goods and Services Tax (GST) is a federal tax that was implemented in 2008. A GST rate of 5% is added to the cost of most goods and services in Canada.
Price tags usually show the pre-tax price for a product or service, after which GST is added at the point of sale. For instance, if you’re buying a product for $50, the after-tax cost would be $52.50 if only GST is applied.
Alberta, Nunavut, Yukon, and the Northwest Territories don’t have other sales taxes besides GST, while all other provinces do.
What Is HST?
Harmonized Sales Tax (HST) is a combination of PST and GST. Since only one sales tax is required, it simplifies sales taxes for businesses charging it.
HST is applied in the following provinces:
- Ontario: 13%
- New Brunswick: 15%
- Nova Scotia: 15%
- Newfoundland and Labrador: 15%
- PEI: 15%
What Is PST?
Provincial Sales Tax (PST) is a tax applied to goods and services in British Columbia and Saskatchewan:
- BC: 7% PST
- Saskatchewan: 6% PST
What Is QST And RST?
In Quebec and Manitoba, the provincial sales tax is referred to as QST (Quebec Sales Tax) and RST (Retail Sales Tax), respectively:
- Quebec: 9.975% QST
- Manitoba: 7% RST
In these cases, the GST and PST/QST/RST would be added together to equal the entire sales tax payable. For example, if you bought a product in BC for $50, you would pay an additional 12% (5% + 7%). The total would be $56.
Sales Tax Rate By Province
The following chart details the type and amount of sales tax in each province and territory:
|Province/Territory||Total Sales Tax Rate||HST||GST||QST/RST/PST|
|Newfoundland and Labrador||15%||15%||N/A||N/A|
Are Goods And Services Taxed Equally?
Not all products and services are taxed exactly the same way in Canada. Although GST/HST is applied in most cases, some exceptions exist. For instance, some things may be taxed at different rates, and others may be exempt altogether.
Types Of Items That Are Taxed
In Canada, most items, services and properties are taxed, whether they’re imported in or supplied in Canada.
- Apparel and shoes
- Foods like chips, candy and soft drinks
- Grooming services such as hair salons and barber shops
- Ride-sharing and taxi services
- Car and house sales
What Items Have Zero Tax Rates?
The following goods are zero-rated:
- Basic food items from grocery stores, such as bread, milk, produce, meat, and fish
- Prescription medication
- Medical devices, such as hearing aids and dentures
- Feminine hygiene products
- Agricultural products, such as grain and raw wool
- Farm equipment
- Most livestock
- Exported goods and services
- Transportation services if the origin/destination is outside Canada
How To Calculate Sales Tax In Canada?
To calculate how much more you’ll need to pay for a product or service, you’ll first need to verify which sales tax rate applies in your province or territory.
Then take that tax rate and multiply it by the pre-tax price of the goods or services you’re purchasing to arrive at the total sales tax you’ll need to pay.
For example, let’s say you live in Ontario, where HST applies to goods and services at a rate of 13%. If you’re purchasing a product for $50, the total HST payable would be $6.50 ($50 x 13%). The total cost with both the pre-tax price and the sales tax would work out to $56.50.
Since price tags for goods and services typically don’t include the total including sales tax, the price can be deceiving. It’s always good to know what the tax rate is where you live or are travelling to and be able to do a quick rough calculation when shopping to get an idea of the true cost of the product or service.
Sales Tax Credits In Canada
A sales tax credit is a payment made to eligible low-to-moderate income households to make up for sales tax paid. There are many different tax credits available in Canada, but whether you’re eligible depends on if you meet the requirements.
GST/HST Tax Credit
The GST/HST tax credit is a payment made every quarter to low-income and moderate-income Canadians. The tax credit can be used to offset your tax debts or be sent to you as a payment. The credit is paid out on the following dates each year:
- January 5
- April 5
- July 5
- October 5
If you qualify for the GST/HST tax credit you can get up to $467 if you’re single and $612 if you’re married or have a common-law partner. Additionally, if you have children, you can get up to $161 per child that is under the age of 19.
If a household’s net income exceeds a certain threshold (varies based on your family composition), you won’t be eligible for the GST/HST credit. For example, if your household net income exceeds $49,166 as a single individual you’ll no longer be eligible for the GST/HST tax credit.
Digital News Subscription Tax Credit
The digital news subscription non-refundable tax credit for individuals who paid qualified Canadian journalism organizations (QCJOs) for eligible subscription expenses in a qualifying year. Individuals can save up to $75 in taxes using the digital news subscription tax credit. The QCJO must not hold a license as specified under subsection 2(1) of the Broadcasting Act in order for this credit to apply.
The digital news subscription must also allow the person to access content in a digital format that’s predominantly written news. Further, the subscription must take place after 2019 and before 2025.
Sales Tax 101 For Business Owners
If you operate a business, you’ll need to charge your customers some form of sales tax, depending on where the product or service is supplied. If the customer buys a product or service while in person, your provincial sales tax would apply. However, if your goods or services are delivered to an out-of-province customer, you must charge the sales tax that applies in their province or territory.
When invoicing customers, it’s important to detail the pre-tax price, the type of sales tax(es), the tax rate(s) applicable, and the total amount owed. You should also track the total amount in sales taxes charged to your customers and how much sales tax paid to your vendors. When it’s time to file your taxes, you’ll pay the difference between how much you collected versus what you paid.
Do You Need To Register For GST/HST?
You’re only required to register for GST/HST if your company earns over $30,000 in sales within 4 consecutive quarters or within a single calendar quarter. If you earn less than this, you may not have to register, which can save you time and hassle.
If you must register, there are a few ways to do so:
- Online with the Canada Revenue Agency (CRA)
- By telephone at 800-959-5525
- By mail by sending form RC1 E to your tax center or tax services office
- By fax
Find Out How To Get A:
How To Pay GST/HST For Your Business
You can pay your GST/HST in a few different ways:
- Electronically via the CRA’s My Payment payment service online
- Using your bank or credit union’s telephone or internet banking services
- Through a pre-authorized payment to the CRA from your bank account on a specific date
- In-person at your bank
- Through the mail by sending the remittance voucher from your personalized GST Return along with a cheque or money order.
Do You Need To Register For PST?
You only need to register for PST if your business operates in a province where this tax applies. You’ll also need to collect these taxes from your customers when you sell your products or services.
You’ll need to register for PST (or RST/QST) with the appropriate provincial government. This sales tax type is applicable in BC, Manitoba, Saskatchewan, and Quebec.
- Register for PST in British Columbia
- Register for RST in Manitoba
- Register for QST in Quebec
- Register for PST in Saskatchewan
How To Pay PST For Your Business
You can pay for your PST/RST/QST vis one of the online portals listed above. Some provinces may also allow you to pay via the mail, through your bank, or at a government office. Just keep in that this is not an option in all provinces, for example, business owners in Manitoba must pay their RST via the TAXaccess online portal.
Sales Tax FAQs
How much is sales tax in Canada?
What is HST?
Do small businesses have to charge GST/HST?
Whether you’re a consumer paying sales tax on goods or services purchased or a business responsible for charging tax, you should know what kind of sales tax is applicable and its respective tax rate. You could be paying anywhere from 5% to 15% in sales taxes when making a purchase, depending on where you are. Or you may not be required to pay sales taxes at all if you’re purchasing a zero-rated item.