If you sell goods and services in Canada, you must charge customers the goods and services tax (GST) or the harmonized sales tax (HST), unless your business qualifies as an exception. Currently at 5%, the GST is a federal tax charged in all provinces and territories in Canada on both products and services, either by itself or as part of the HST.
Canadian Provincial Sales Tax and GST/HST
In the provinces of Ontario, Nova Scotia, New Brunswick, Prince Edward Island (PEI), Newfoundland and Labrador, you must charge HST because these provinces have combined the GST with their provincial sales tax (PST) to create a HST.
Other provinces, such as British Columbia, Saskatchewan, Quebec and Manitoba, have kept their provincial sales taxes (PST/QST/RST) separate from the federal GST tax system. Therefore, in those provinces, your business must charge, collect, and remit both GST and PST/RST/QST—and fill out two sets of forms.
|British Columbia||5%||7% Provincial Sales Tax (PST)|
|Saskatchewan||5%||6% Provincial Sales Tax (PST)|
|Manitoba||5%||8% Retail Sales Tax (RST)|
|Quebec||5%||9.975% Quebec Sales Tax (QST)|
|Prince Edward Island||15%|
|Newfoundland and Labrador||15%|
Exceptions for Charging the GST/HST
If your Canadian business fits one of these two exceptions, it won't have to charge, collect, and remit GST/HST:
- Selling goods or services that are classed as GST zero-rated or exempt. If you are selling goods or services that are zero-rated, such as exports, medical devices or basic groceries, or goods or services that are exempt, such as music lessons or child care, you don't have to charge GST/HST.
- Being a small supplier. Being classed as a small supplier depends on your annual revenue. According to the Canada Revenue Agency (CRA), your business will qualify as a small supplier if "your total taxable revenues before expenses from all your businesses are $30,000 or less in the last four consecutive calendar quarters and in any single calendar quarter."
Note that if the first exception does not apply and you make over $30,000, you have to register for and charge GST/HST. Also, there are exceptions to the exceptions. For instance, taxi and limousine operators and non-resident performers have to charge GST/HST even if they are small suppliers. You may want to register for the GST/HST even if it is not a requirement because of the potential tax benefits.
GST/HST Registration Process
Before you can charge the GST/HST, you'll need to register to collect and remit it through the CRA. Registration can be done on the phone, online, by mail, or even in person at a tax office.
Note that if your business is in Quebec, you need to contact Revenu Quebec, as they deal with GST/HST in the province rather than the federal government.
If your small business starts out as a small supplier but then earns more than the $30,000 limit, you'll want to register for GST/HST quickly, as you will be considered a GST registrant. You will have to do the following:
- Collect GST/HST on the supply that made your revenue exceed $30,000
- Register within 29 days of the day that your supply caused your revenue to exceed $30,000
If your small business is classed as a small supplier, you'll want to watch your revenue carefully.
When you register to collect GST/HST, your business will be assigned a business number; this is the number that you and the CRA use to identify your business. You'll be using it on all your invoices, in your accounting system, and in all your tax-related correspondence with the CRA.
Businesses that sell products or services in Canada must charge GST or HST, unless they qualify as an exception. As a business owner, it is therefore important to understand the exceptions as well as the requirements for charging, collecting, and remitting GST/HST for any sold products or services in your province.