Understanding Sales Tax in Canada: Rates and Requirements for Businesses
If you are selling goods or services in Canada, understanding the various sales tax requirements is crucial for compliance. Sales taxes in Canada differ by province, and knowing the correct tax rate to apply is essential to avoid penalties. Here's an overview of the Canada sales tax system, including provincial rates such as Ontario sales tax, Quebec sales tax, and the HST rate in Ontario.
What is Sales Tax in Canada?
In Canada, sales tax operates at both the federal and provincial levels. The federal sales tax, known as the Goods and Services Tax (GST), applies nationwide at a rate of 5%. However, most provinces impose additional sales taxes.
Federal Sales Tax (GST)
The GST is a federal sales tax that applies at a rate of 5% on most goods and services across Canada. This is a value-added tax, meaning it is applied at every stage of the production and distribution process. All businesses selling goods and services must charge and remit GST, unless the goods or services are exempt or zero-rated.
Provincial Sales Tax (PST) and Quebec Sales Tax (QST)
In addition to the federal sales tax, several provinces have their own provincial sales tax. In Quebec, this tax is known as the Quebec Sales Tax (QST). The rates for these taxes vary across provinces:
· Ontario Sales Tax: Ontario uses the Harmonized Sales Tax (HST), which combines both federal and provincial tax into one tax rate. The HST rate in Ontario is 13%.
· Quebec Sales Tax (QST): Quebec has its own sales tax, called QST, which is currently 9.975%. The QST is separate from the federal GST.
· PST in Other Provinces: Other provinces, such as Saskatchewan and British Columbia, impose a separate provincial sales tax (PST). For example, PST in British Columbia is 7%, while Saskatchewan’s PST is 6%.
Harmonized Sales Tax (HST)
In some provinces, like Ontario, Nova Scotia, and Newfoundland and Labrador, the HST combines the GST and PST into one tax. The HST rate in Ontario is 13%, which includes 5% GST and 8% provincial sales tax.
Other provinces with HST include Prince Edward Island, New Brunswick, and Nova Scotia. The HST stands for the Harmonized Sales Tax, and businesses in these provinces must collect and remit the tax to the Canada Revenue Agency (CRA).
Sales Tax in Quebec
In Quebec, businesses are required to collect both the GST and QST. The Quebec sales tax is 9.975%, while the federal GST is 5%, resulting in a total sales tax rate of 14.975% for most goods and services.
For businesses operating in Quebec, it's essential to understand the QST and can either use the Quebec sales tax calculator to correctly calculate QST and GST rates or calculate it manually.
Sales Tax Ontario: What You Need to Know
Ontario follows the Harmonized Sales Tax (HST) system, which combines the federal GST and provincial sales tax into a single tax. The Ontario sales tax rate (HST) is 13%, which is applied to most goods and services sold in Ontario. The Ontario sales taxes are collected by businesses and remitted to the CRA.
If you're selling in Ontario, you can use the Ontario sales tax calculator to help determine the right tax rate to apply based on the type of goods or services you sell. It's important to check whether any specific exemptions or reduced rates apply to certain items.
Canada Sales Tax Rates by Province
- Ontario: 13% HST
- Quebec: 9.975% QST + 5% GST = 14.975%
- British Columbia: 7% PST + 5% GST = 12%
- Saskatchewan: 6% PST + 5% GST = 11%
- Newfoundland and Labrador: 15% HST
- Nova Scotia: 15% HST
Sales Tax Registration and Tax ID Canada
All corporations registred in Canada get a Business Number (BN), which is issued by the Canada Revenue Agency (CRA). This number is used to create GST/HST program account with CRA.
For non-resident vendors (businesses located outside Canada), registering for GST/HST is mandatory if sales exceed $30,000 CAD annually for taxable goods or services in Canada.