Sales tax is a fact of life in Ontario, and as a consumer, it’s helpful to understand how much more you’ll need to pay once taxes are factored in.
If you’re a business owner, knowing how to tax your customers is even more important, especially when dealing with out-of-province customers.
Let’s go into more detail about the applicable sales tax in Ontario, and how it compares to other provinces in Canada.
Sales Tax In Ontario
In Ontario, a 13% Harmonized Sales Tax (HST) is applied to most purchases. This includes both Goods and Services Tax (GST) and Provincial Sales Tax (PST).
Sales Tax Formula For Ontario
Here’s an example of how sales tax in Ontario is calculated.
Let’s say you’re buying a product for $50. Based on the applicable 13% sales tax rate, the total tax and price owed would be as follows:
$50 + 13% HST ($6.50) = $56.50
In this example, the total sales tax would be $6.50, and the total price would be $56.50.
Sale Tax Exemptions In Ontario
Certain goods and services are not charged the 8% PST. These exemptions are separate from the federally-granted exemptions and include the following categories:
- Print newspapers
- Paper books
- Audiobooks
- Children’s clothing, footwear, and diapers
- Children’s car seats and booster seats
Other exemptions to HST in Ontario also apply:
Ontario First Nations and PST
Registered First Nations are also exempt from the 8% PST portion of the HST on products in several categories, including the following:
- Adult clothing
- Many household products
- Vehicles
- Medications
This rebate is also applicable to purchases made off-reserve.
Does Ontario Charge RST?
Some items are charged a Retail Sales Tax (RST) instead of HST, including used vehicle sales, boats, and aircraft. You’ll have to pay a 13% RST when you register the vehicle with Service Ontario, which is separate from HST. This applies to vehicle purchases in Ontario and those that are imported from another province or country.
If you buy a used vehicle from a dealership registered to collect HST, you’ll need to pay HST. Otherwise, private used car sales require the buyer to pay RST instead.
If you purchase a new vehicle, the 13% HST will apply, not RST.
Insurance is another item that is also charged RST instead of HST in Ontario.
The revenue collected from HST is divided among both the provincial and federal governments, but revenue from the RST goes to the Ontario government only.
What Happens If You Make A Purchase Online From A Store In Another Province?
When you buy something in Ontario, you’ll pay 13% HST on top of the price. But does the same rule apply when you buy something outside of Ontario?
Things get a little more complicated when it comes to taxing products from outside the province, though you as a consumer don’t have to worry about it so much; instead, it’s the merchant who is responsible for figuring out the appropriate tax to charge.
If you live in Ontario, you will pay the applicable tax rate in the province. So, no matter where the vendor is located, the Ontario tax rate will apply.
To illustrate, let’s say you live in Ontario but are buying a pair of shoes online from a merchant who is located in Alberta. Even though the shoes are being delivered from outside the province, they will still end up in Ontario. That means you’ll pay the 13% HST sales tax applicable in Ontario, not the sales tax in Alberta.
The rule surrounding the destination of supplied goods and services applies predominantly to online sales, not in-person sales. So, if you’re buying those same pair of shoes from a brick-and-mortar store, you’ll pay the sales tax in the province or territory where you’re physically buying the product or service.
Do You Qualify For The GST/HST Tax Credit in Ontario?
In Ontario, a GST/HST credit may apply, which is designed to help alleviate the financial burden of GST/HST payments for individuals and families considered low-income. Those who qualify will receive tax-free, quarterly payments from the Canada Revenue Agency (CRA).
Notes, these payments may be combined with other provincial and territorial programs and show up on your bank statement as “Canada FPT” or “Canada FED“. You’ll be automatically considered for the GST/HST credit when you file your income taxes each year.
Eligibility Criteria For GST/HST Credit in Ontario
To qualify for the GST/HST credit, you must meet the following criteria:
- Be a resident of Canada at the beginning of the month when a payment is made.
- Be at least the age of majority in the month before a quarterly payment is made.
- Have/had a spouse or common-law partner in the month before a quarterly payment is made.
- Are/were a parent and live/lived with your child in the month before a quarterly payment is made.
GST/HST Tax Credit Payment Dates in ON
The GST/HST credit quarterly payments are made every year on the following dates:
- January 5th
- April 5th
- July 5th
- October 5th
This credit starts at $299 with an additional $157 for families with a net income over $9,686. The credit will gradually be reduced for families with net incomes exceeding $38,892.
Other Ontario Tax Credits
The following refundable tax credits are available in Ontario:
Childcare Access And Relief From Expenses (Care) Tax Credit
You may qualify for this tax credit if you were an Ontario resident at the end of the year and claimed childcare expenses for at least one eligible child on your tax return.
Co-Operative Education Tax Credit
You may be eligible for this credit if you operate an unincorporated business. If so, you can include the credit amount claimed for 2021 as self-employment income on your 2022 tax return. If you’re part of a partnership — except a limited partner — you can claim your portion of the partnership’s credit for every eligible co-op work placement.
If you hired at least one co-op student who is enrolled in a college or university in Ontario, you may claim a tax credit of up to 30% of qualifying expenditures up to $3,000 per student per eligible work placement.
Jobs Training Tax Credit
You may be eligible for this tax credit if you were a resident of Ontario as of December 31, 2021, have a 2021 Canada Training Credit Limit more than zero and have entered an amount on line 32000 of your federal Schedule 11, Federal Tuition, Education, and Textbook Amounts and Canada Training Credit.
Political Contribution Tax Credit
You may be eligible for this credit if you were an Ontario resident at year-end and contributed to a registered Ontario political party or a candidate in a 2021 Ontario provincial election.
Seniors’ Home Safety Tax Credit
You may be eligible for this credit if, at the end of 2021, you were an Ontario resident, a senior at least 65 years old or live with a senior, or paid qualifying expenses in 2021 to improve your principal residence.
Are you receiving the Ontario Child Benefit (OCB)?
Sales Taxes and Businesses In Ontario
If you operate a business in Ontario, who’ll need to verify whether or not you need to register for GST/HST and how to tax sales made outside Ontario.
Sales Tax Registration
Most businesses in Ontario must register for GST/HST, except for small businesses that earn less than $30,000 over four straight quarters.
Taxing Out-Of-Province Sales
The sales tax you should charge an out-of-province customer depends on where your product or service is supplied. For instance, if a customer buys from you at your physical location in Ontario, the Ontario sales tax would apply. But if you deliver a product or service to another province, you should charge the sales tax applicable to your customer’s location.
Sales Tax In Ontario FAQs
How much is PST in Ontario?
What’s the difference between GST and HST?
How high are Ontario taxes compared to the rest of Canada?
Final Thoughts
Whether you’re a consumer in Ontario or operate a business in the province, it’s important to be familiar with the type of sales tax applicable. Taxes charged on goods and services are relatively straightforward for consumers, but for businesses, determining how to tax customers is a little more complex. Either way, an understanding of how sales tax works in Ontario is helpful.
