Small Business Guide to Canadian Sales Tax Rates
It’s rewarding to be an entrepreneur: realizing your dream, being your own boss, flexible hours, etc. However, entrepreneurship also comes with responsibilities, including charging correct sales tax for your goods and services.
Which one should you charge your customers, GST, PST, QST, RST, or HST? Pretty confusing, isn’t it? Don’t worry. We’ll explain them all: the types of sales tax in Canada, the rates for each province, general rules and exemptions, how to register for a sales tax account, as well as filing and paying your sales tax.
We encourage you to speak to a tax professional, but this guide helps you prepare yourself with some foundational knowledge.
Types of sales tax in Canada
There are two tiers of sales tax in Canada: federal and provincial. Let’s understand what they all mean:
- GST (Goods and Sales Tax): This is a federal tax charged on the supply of most goods, other property and services in Canada. Businesses must register and charge GST/HST on all taxable goods, other property, and services unless you qualify as a small supplier. A small supplier is defined as a person whose total taxable revenue is $30,000 or less in the last four consecutive calendar quarters. A small supplier can elect to register in which case it must collect GST.
- PST (Provincial Sales Tax): This is a sales tax levied on goods and taxable services provinces that have not harmonized their PST with the federal GST. Rates are set by each province and do vary, as not all provinces charge PST.
- RST (Retail Sales Tax): The provincial sales tax in Manitoba is called retail sales tax (RST).
- QST (Quebec Sales Tax): Businesses registered in Quebec are required to charge customers Quebec sales tax (QST) instead of PST. QST is collected on the supply of most goods, other property and services.
- HST (Harmonized Sales Tax): Some provinces have merged their provincial sales tax with GST. Simply put, harmonized sales tax (HST) is a combination of GST and PST.
Sales tax and rates by province
Businesses may be required to collect one or more of the sales taxes mentioned in the above section.
To make it easier for you, we’ve listed the type of sales tax and combined rates applicable to each province/territory:
Canadian sales tax rates table by province and territory
|Province or Territory||Sales Tax Type||Combined Tax Rate|
|British Columbia||GST & PST||12%|
|Manitoba||GST & PST||12%|
|Newfoundland and Labrador||HST||15%|
|Prince Edward Island||HST||15%|
|Quebec||GST & QST||14.975%|
|Saskatchewan||GST & PST||11%|
Rules and exemptions with sales tax
- Sales Tax Rules: Canadian businesses need to understand the rules that determine which province’s taxes to charge. The applicable sales tax to charge is typically based on the location of the customer or where goods are delivered. For example, if you sell reclaimed furniture out of your store in Vancouver and ship to a customer in Toronto, you’ll charge 13% Ontario HST on the sale.
- Zero-rated Sales Tax and Exemptions: Not all goods and services are taxable. If you are a new business owner or planning to be, it’s important to familiarize yourself with what is–and isn’t–taxable in Canada. Under the GST there are goods, other property, and services that are either taxed at the rate of 0% (e.g. basic groceries) or exempt (e.g. home and auto insurance, public transit, child care, etc.). Also, PST-exemptions and exceptions vary from province to province. We highly encourage you to visit the government websites or talk to a tax professional to verify.
Register for a sales tax account
You need to register for a sales tax account to charge and file sales tax with the government.
There are usually several ways to register (online, call, in person, etc.) and here’s a list of websites to learn more and register:
- GST/HST: the Government of Canada’s website.
- QST in Québec: Revenu Québec.
- RST in Manitoba: TAXcess.
- PST in British Columbia: eTaxBC.
- PST in Saskatchewan: Saskatchewan eTax Services.
Filing and paying sales tax
Like most things, it helps to have a system in place. As you collect sales tax, we recommend you deposit the funds in a designated bank account for paying the CRA (Canada Revenue Agency) or a provincial revenue ministry.
Most of the filing can be done electronically, by mail or at a participating financial institution.
Businesses must file tax returns regardless of whether there is tax collected or not. Moreover, a business can recover GST or HST paid on its tax return/claim, even if they have not collected any HST. To learn more about filing a GST/HST return, read our guide to filing your first GST/HST return. Or visit the Government of Canada’s website.
Businesses collecting QST will be required to file a QST return every reporting period, even if you don’t owe QST. Visit Revenu Québec for more information.
Any RST you collect must be reported on an RST return form, which has line-by-line instructions. How often you are required to file depends on the amount of RST you charge each month. Visit the government’s website for more information.
If you charge PST for customers in B.C, you must remit all PST charged, whether you have received the tax from customers or not. Visit eTaxBC to learn more.
Businesses collecting taxes tax in Saskatchewan must file a PST return monthly, quarterly or annually, depending on the amount of tax you report. Even if your business collects no tax for that period, you will still file a “NIL” return. Visit the provincial government’s website for more information.
Ready to start your business? Ownr is here to help! If you have questions about how to register or incorporate your business, give us a call at 1-800-766-6302, Monday through Friday from 9 am to 5 pm EST, or email us: [email protected]
Information provided is correct at the time of publication.
Ownr is not an accounting or tax advisory firm. We do not provide any accounting, tax or other professional advice or opinions. The information contained in this article is provided solely for informational purposes. You are advised to seek accounting, tax or other professional advice by contacting an accountant or other relevant professional.