Businesses must register to collect PST in any province where they have a physical presence or conduct substantial business activities. For example, in British Columbia, businesses must register and charge PST if they sell or lease taxable goods, software, or services in the province. The Harmonized Sales Tax (HST) is a combination of the federal GST and the provincial sales tax (PST). This blended tax is applied in certain provinces to streamline the sales tax process and reduce administrative burdens for businesses. Most businesses operating in Canada are required to collect sales tax. Businesses whose global annual revenue exceeds $30,000 must register for GST/HST.
Businesses in these provinces charge, collect, and remit HST much as they would GST, making administration more streamlined. For detailed place-of-supply rules, see GST/HST rates and place-of-supply rules. At Canadian Tax Compliance, we make sure that our clients are fully aware of these differences and have the support they need to navigate Canada’s unique GST/HST/QST/PST system. We handle the registration, calculation, and filing of your sales tax, so you can focus on growing your business. For starters, Canada has a Goods and Services Tax (GST) and a Quebec Sales Tax (QST) that are similar to Value-Added Tax (VAT) systems in other countries.
Three steps to collecting and remitting sales tax
If your business exceeds the C$30,000 threshold, you must register for HST and charge it on all applicable sales. Each province sets its own rules regarding exemptions and the application of PST. For example, certain essential items such as groceries and prescription medications may be exempt from PST in some provinces. Consumers and businesses need to be aware of these exemptions to ensure they are complying with provincial tax laws. HST is implemented in provinces that have agreed to harmonize their provincial sales tax with the federal GST. The HST rate varies by province, as each province sets its own rate.
- Businesses must register for GST if their total taxable revenues exceed C$30,000 over four consecutive quarters.
- Combined with the GST, you pay 14.975% on most goods and services.
- The rate is 15%, including the federal 5% and a 10% provincial sales tax.
- Knowing which taxes apply to your products helps you price them correctly, pass these costs to your customers, and ensure a smooth import process.
- The intention is to compensate them for the GST/HST they have paid.
What is the late penalty incurred for GST/HST late filing?
If you sell products and services in Canada and your business is not exempt, you may be required to register for a GST/HST account and collect sales taxes. Sales taxes on new or significantly renovated housing used as a primary residence may be eligible to have a portion of charged federal and provincial sales taxes rebated. In e-commerce, sales taxes are generally based on the destination of the goods or services.
To complicate matters further, the rate of the HST and PST can vary depending on the province in which the sale is made. For example, the HST rate in Ontario is 13%, while the PST rate in British Columbia is 7%. As an online seller, it’s important to know the applicable tax rates in each province to ensure you’re charging the correct amount of tax on your sales. Canada’s tax system is designed to support federal and provincial governments in providing essential services and infrastructure. The federal Goods and Services Tax (GST) is a value-added tax levied on most goods and services sold for domestic consumption. In addition to the GST, many provinces have their own Provincial Sales Tax (PST), which is applied to certain goods and services within their jurisdiction.
After understanding the differences between the federal and regional levels in Canada, it is particularly crucial and necessary to conduct a detailed analysis of these three tax items. Mastering and familiarizing oneself with the Canadian Goods and Services Tax is a necessary step for every seller to enter the Canadian market. Here’s a detailed guide to help you through the registration and remittance process for GST, HST, and PST. This is meant to simplify the process for businesses, but it can still be confusing for those unfamiliar with the system. The HST simplifies compliance by merging federal and provincial taxes, reducing administrative complexity. The Goods and Services Tax (GST) is a federal value-added tax applied at a rate of 5% on most gst pst canada goods and services sold in Canada.
Struggling with a CRA Tax Bill You Can’t Pay in Full: 2025 Guide
You need to record, track and save a record of the items purchased, such as a copy of the invoice, receipts, or contract. If you pay GST or HST on goods and services for your business, you are eligible to claim some of these credits, which is a great way in helping to reduce your tax liability. It’s crucial to get your GST number right, as this number identifies other business dealings your company has with the CRA.
How to file PST return?
To qualify, your business’s worldwide yearly revenue (before expenses) needs to fall below $30,000. When it comes to sales tax, the CRA measures your “year” as the last four quarters. As soon as you surpass the $30,000 mark, you’re no longer a small supplier, starting in that calendar quarter. There’s more to sales tax than just figuring out how much you need to charge. Ontario, Nova Scotia, New Brunswick, PEI, and Newfoundland and Labrador use the HST model.
- While HST simplifies things in harmonized provinces, the rate varies because the provincial portion differs from one province to the next.
- This means that the tax rate and rules for PST can vary depending on where the good or service is provided, adding an additional layer of complexity for online sellers.
- However, certain items, such as basic groceries, prescription medications, and medical devices, are exempt or zero-rated, meaning they are not subject to GST.
- It’s important to note that PST only applies to goods and services within the specific province that imposes it.
- It can be especially difficult if you are a non-Canadian doing business in Canada.
Using the invoicing feature in Deskera Books, you can specify your customers’ location and charge the correct tax rate using the tax configuration in the system. Hence, you and your customers will how much GST/HST/PTS are collected from them. You have to complete your tax return and ensure that the payment is made on or before the last day of the following month, after the end of your reporting period. If you are a business in Quebec, or a supplier selling taxable goods and services in Quebec, you have to register for the Quebec Sales Tax (QST) account. If your business sells to a province with a PST rate, you have to collect PST from the customer and then file a PST return for the sales made in Saskatchewan. You can check the due date of your filing period on Form GST34-2.
Combined with its low personal income tax rates, Albertans continue to pay one of the lowest taxes overall in Canada. Suppose the total taxable supplies are CAD 30,000 or more over 12 months. In that case, the non-resident vendor will have to register, charge and remit GST/HST to the Canada Revenue Agency (CRA). Provincial Sales Tax, a province sales tax, is explicitly collected in a province, a separate tax from the Goods and Service Tax (GST). The HST program aims to combine both federal GST and PST to become one standard rate to promote consistency and improve the efficiency of sales tax collection. The Harmonized Sales Tax (HST) is a consumption tax levied at the point-of-sale, which adds a percentage to the selling price of goods and services collected from the customers.
Effective January 2021, paper filing for monthly RST returns is no longer permissible in Manitoba. However, you can still use the paper filing for any quarterly or annual RST returns. For example, if you owe $30,000 in GST/HST and are three months late in making the payment, you can use the formula above to compute the penalty. Need an accounting software to track your business activities in Canada?
For example, if you’re an indigenous people in Canada and bought a property on/off a reserve or have the property delivered to a reserve by a vendor, you are exempted from paying GST/HST. Under the Indian Act, these groups of people (also known as the First Nation of Canada) do not have to pay GST/HST. Generally, most people will have to remit tax in Canada, except for the Indian, the Indian band, or the band-empowered entity. You can use this chart to have a quick overview of the tax requirement of one province to another in Canada.
This is in addition to any customs duties you may be required to pay. Input tax credits allow businesses to recover the GST/HST paid on purchases and expenses related to their operations. Be sure to review the specific taxability rules for your industry to ensure accurate tax collection and remittance. In Quebec, the provincial sales tax is called the Quebec Sales Tax (QST).
This simplification can reduce administrative costs and improve efficiency in tax compliance. Businesses can also claim input tax credits for HST paid on business expenses, similar to the GST system, ensuring that the tax is ultimately borne by the final consumer. The Harmonized Sales Tax (HST) is a combination of the GST and a provincial portion, applied in provinces that have harmonized their sales taxes into one system. HST simplifies administration by consolidating federal and provincial tax collection, making it easier for businesses to manage.
Businesses operating in Canada must navigate the complexities of collecting and remitting these various sales taxes. This includes understanding the different rates and rules that apply in each province where they do business. Failure to comply with these tax laws can result in penalties and interest charges. For businesses, the HST provides a streamlined process for tax collection and remittance, as they only need to deal with one tax authority rather than separate federal and provincial entities.
The three northern jurisdictions are partially subsidized by the federal government, and their residents receive some additional tax concessions due to the high cost of living in the north. Businesses operating in HST provinces (New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island) must charge HST on taxable supplies. The obligation to charge HST follows similar rules to GST registration.