Overview of charging and collecting sales tax
As a Canadian business owner, it's important to know how and when to charge sales taxes for the goods and services you sell and supply to your customers. Our guide to charging and collecting sales tax will provide you with an understanding of your responsibilities, as well as some valuable resources to help you charge sales taxes and remit them properly to the government.
This information is an overview on charging and collecting taxes for business. Before making any business decisions on taxation, please refer to the Canada Revenue Agency and your provincial or territorial revenue agency.
Table of Contents
Charging sales tax
Do you sell goods or provide services in Canada? If so, you are required to collect sales tax from your customers on many of the items they purchase.
Depending on the province or territory in which you operate your business, you need to collect either:
- A combination of GST and PST
- GST only
HST combines PST with GST to create one tax. If you operate in an HST-participating province, you will collect sales tax at the following rates:
- New Brunswick: 15%
- Newfoundland and Labrador: 15%
- Nova Scotia: 15%
- Ontario: 13%
- Prince Edward Island: 15%
If you operate in the following provinces, you need to collect 5% GST as well as provincial sales tax, with provincial sales tax rates as follows:
- British Columbia: 7% provincial sales tax (PST) on retail price only
- Manitoba: 8% retail sales tax (RST) on retail price only
- Quebec: 9.975% Quebec sales tax (QST) on retail price only
- Saskatchewan: 6% provincial sales tax (PST) on retail price only
If you operate in the province of Alberta or in one of the three territories (Northwest Territories, Nunavut or the Yukon), you do not need to collect sales tax on goods and services beyond the 5% GST.
|Province/Territory||Type||GST (%)||PST (%)||Total tax rate (%)|
|British Columbia||GST + PST||5||7||12|
|Manitoba||GST + PST||5||8||13|
|Newfoundland and Labrador||HST||5||10||15|
|Prince Edward Island||HST||5||10||15|
|Quebec||GST + PST||5||9.975||14.975|
|Saskatchewan||GST + PST||5||6||11|
Charging sales tax to out-of-province/territory customers and to foreign customers
If you are a vendor in one province or territory and you make sales to residents of another province or territory, what sales taxes do you charge them? When you sell and ship or deliver taxable goods and services to out-of-province/territory customers, the sales tax that applies in your customer's province or territory is generally applicable.
Alberta, Nunavut, Northwest Territories, Yukon
If you sell goods and services to residents of Alberta, Nunavut, Northwest Territories or the Yukon, you are required to collect GST.
Prince Edward Island, New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario
When you sell to HST-participating provinces (Prince Edward Island, New Brunswick, Newfoundland and Labrador, Nova Scotia and Ontario), you are required to collect HST in the amount applicable to the province and include it in your GST/HST return. In this case, since you are already registered for GST, you are automatically registered for HST, even if you do not operate in an HST-participating province.
You are required to register to collect PST if you regularly do any of the following:
- Sell taxable goods, taxable software or telecommunication services to customers in BC
- Accept purchase orders for taxable goods, taxable software or telecommunication services from customers located in BC
- Deliver taxable goods to a location in BC
- Solicit persons in BC (through advertising or other means) for orders to purchase taxable goods, taxable software or telecommunications services
If you sell taxable goods and services to residents of Manitoba, you are required to register under the Retail Sales Tax Act and collect retail sales tax, if all of the following apply:
- You solicit sales in Manitoba (via advertising or other means).
- You accept orders originating in Manitoba.
- The taxable goods are for consumption/use in Manitoba — not for resale.
- You cause the taxable goods to be delivered to Manitoba, regardless of who pays for the delivery.
As a rule, any person who sells taxable goods or provides taxable services in Quebec as part of their commercial activities is required to register for QST. This rule excludes small suppliers, persons whose only commercial activity is supplying real property by way of sale other than in the course of the activities of a business, and persons who do not live in or operate a business in Quebec.
Moreover, when a person, other than a small supplier, who does not reside in Quebec but is a resident of Canada, who does not operate a business in Quebec and who, while operating a business in Canada, attempts to solicit orders in Quebec for taxable supplies, other than a zero-rated supply, or to acquire tangible personal property on their own, other than certain written documents, for delivery to a consumer in Quebec, is required to be registered.
If you sell goods and services to residents of Saskatchewan, the province asks you to consider registering to collect PST as a convenience to your customers; however, if you do not, the responsibility will be on your customers to pay the PST on their out-of-province purchases.
Foreign customers (outside of Canada)
If you sell goods or services to customers outside of Canada, you are not required to collect GST/HST or PST, provided they take delivery of the goods or services outside of Canada. The service must be wholly used outside of Canada. If non-resident customers, such as tourists, make purchases within your province or territory, they are required to pay the GST/HST and PST. In some cases, they may be eligible to receive a GST/HST rebate.
What goods and services are subject to sales tax?
Before you begin selling goods and services, familiarize yourself with what is and isn't taxable.
Many retail goods and services are subject to GST/HST; however, some supplies, such as basic groceries, prescription drugs, most livestock and many agricultural and fishery products are zero-rated. This means that GST/HST applies to them, but at a rate of 0%.
Other supplies, such as most health, medical, and dental services performed by licensed physicians or dentists for medical reasons, child care, residential rentals and music lessons are GST/HST exempt.
The basic difference between zero-rated and exempt goods and services is that you can claim input tax credits for those that are zero-rated, while you cannot for those that are exempt.
If you operate your business in a province that charges PST, you will also want to familiarize yourself with the goods and services that are subject to PST.
How do I collect GST/HST?
To begin with, you need to register for a GST/HST account. This is done through the Canada Revenue Agency, except in Quebec, where you need to register through Revenu Québec.
A small supplier does not have to register for a GST/HST account. To be considered as such, your business must be a sole proprietorship, partnership or corporation with $30,000 or less in total revenue in the last four consecutive calendar quarters or in any single calendar quarter.
Once you begin collecting GST/HST, you need to inform your customers. Receipts, invoices and contracts are the most common ways of letting clients know what they are being charged. You may also be required to provide specific information on invoices for customers who are also GST/HST registrants, so that they can claim input tax credits.
What are input tax credits?
You can recover GST/HST that you pay or owe on purchases and expenses related to your business activities in the form of input tax credits. Input tax credits are then counted against the GST/HST that you collect during each reporting period.
When claiming input tax credits, it is important to know exactly what qualifies. Generally speaking, if you do not use the item you are purchasing directly for business purposes, you cannot claim an input tax credit for it.
There are other examples of purchases you cannot claim, such as:
- Goods and services used to make GST/HST-exempt goods and services
- Goods or services used for personal consumption
- Membership fees to any club that is primarily for recreational or dining use, unless the membership is acquired for resale
- Some capital property
It is a good idea to familiarize yourself with the many rules and regulations regarding input tax credits. For more information, see:
How do I calculate GST/HST?
GST/HST is added to the retail price of goods and services. For example, in Alberta, where only GST applies, you would calculate a $100 item in the following way:
In Ontario, an HST-participating province, you would calculate the sales tax like this:
Keep in mind that in the PST provinces, sales taxes are calculated in different ways, that is:
In Manitoba and Saskatchewan, PST, like GST, is calculated on the retail price only. The two taxes are then added to the retail price for your total. For example, in Manitoba:
How do I report and send GST/HST to the government?
Once you are registered for GST/HST, Canada Revenue Agency (CRA) will assign you a reporting period; you file a GST/HST return for each reporting period. On your GST/HST return, you will be required to enter the amount of GST/HST you collected during the reporting period, along with the amount of input tax credits you are claiming.
If you operate your business in the province of Quebec, the GST/QST reporting and filing system that is used by Revenu Québec functions very much like that of CRA for the rest of Canada.
The reporting period you are assigned is based on the annual revenue you generate from your sales of taxable goods and services.
Annual revenue from taxable sales
Annual revenue from taxable sales:
|$1.5M or less:||report annually|
|More than $1.5M up to $6M:||report quarterly|
|More than $6M:||report monthly|
If you wish to change your reporting period, perhaps because your business uses accounting periods that are not monthly or quarterly, you must notify the Canada Revenue Agency. When making changes to your reporting period, however, you may only file more frequently than required. For example, if you have been assigned a quarterly reporting period you may choose to file monthly but you are not able to file only annually.
When filing your GST/HST returns, the amount you file is called your net tax. Your net tax for each reporting period is the difference between the GST/HST you charged on your taxable supplies and the GST/HST you paid on business purchases and expenses (input tax credits). The amount will result in either a GST/HST remittance, which occurs when you collect more GST/HST than you paid, or a GST/HST refund, which occurs when you have paid more GST/HST than you have collected.
Some small businesses qualify to use the Quick Method of accounting which simplifies the way in which you calculate GST/HST remittances.
If you are unable to use the Quick Method, you will need to file your GST/HST returns either electronically or using Form GST34, Goods and Services Tax / Harmonized Sales Tax (GST/HST) Return for Registrants, which CRA will send you if you do not file electronically. Keep in mind that most registrants are required to file their GST/HST returns electronically.
If you have a monthly or quarterly reporting period, you are required to file your GST/HST return, along with any money owing, no more than one month after your reporting period.
If you have an annual reporting period, you are required to file your GST/HST return, along with any money owing no more than three months following your fiscal year. In this case, you also have the option of paying in quarterly instalments.
To see if you qualify to use the Quick Method, visit the following Canada Revenue Agency site:
How do I file my return?
Canada Revenue Agency and Revenu Québec requires that most GST/HST/Quebec sales tax (QST) registrants to file their returns electronically. You are required to file electronically if:
- Your business does $1.5 million or more in annual taxable sales
- You are required to recapture input tax credits for the provincial portion of HST or
- You are a builder who has been affected by HST applicable transitional housing measures in British Columbia and Ontario
If you are filing electronically with Canada Revenue Agency, you are required to use one of four methods:
- GST/HST NETFILE
- GST/HST Internet File Transfer
Through a financial institution or third party service provider
- Electronic Data Interchange filing and remitting
With CRA, in most cases, if you are required to file electronically, you can choose one of the four electronic filing options:
- GST/HST NETFILE
- GST/HST TELEFILE
- GST/HST EDI filing and remitting
- GST/HST Internet File Transfer
However, if you are required to recapture input tax credits for the provincial portion of HST or, in some instances, if you are a builder, you must use GST/HST NETFILE to file your return.
If you are eligible to file your return through the mail, CRA will send you either a personalized return (Form GST34) or non-personalized return (Form GST62), which you will be required to complete and return to your tax centre.
For more information on filing GST/HST returns with Canada Revenue Agency, please consult the following information:
In Quebec, if you choose or are required to file your returns electronically, you need to be registered with Clic Revenu - Businesses. Once you are registered, you can file your return one of three ways, using:
- Clic Revenu - Businesses online service
- an online service offered by a participating financial institution
- software authorized by Revenu Québec
If you choose and qualify to submit your return by mail, you must complete form FPZ-500-V, GST/HST-QST Return and mail it to Revenu Québec.
For more information on all aspects of collecting GST/HST, see:
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