There are three different types of tax rates, and they are Goods and Service Tax (GST), Harmonized Sales Tax (HST), and Provincial Sales Tax (PST). Use this calculator to find out the amount you will need to charge before sales tax are applied. PST is a consumption tax that applies to certain goods and services. The PST rate varies by province and is not harmonized with the GST. Provinces that levy a separate PST include British Columbia, Saskatchewan, and Manitoba. For example, British Columbia has a PST rate of 7%, while Saskatchewan’s PST rate is 6%.
This mechanism prevents tax cascading and ensures that the tax is only applied to the final sale to the consumer. It is important for businesses to maintain accurate records and comply with GST regulations to avoid penalties and interest charges. The Canadian sales tax system has both federal and provincial components. The best way to think of it is to consider which tax applies in which province.Goods and Services Tax (GST) is a 5% value-added tax levied by the federal government. This tax applies to the entire country, but some provinces use it as their sole sales tax.
When do businesses need to register for GST, HST, and PST?
And, you will be using the same business number to report your business income tax or using your payroll deduction account. The GST number, is also known as your business number (BN), is a unique 15 alphanumerics tax number given to you by the Canada Revenue Agency during your account registration. If you fit into the small supplier GST registration rule, you can still voluntarily register for GST/HST account, without any restriction. Most businesses in Canada have a GST account except for those deemed small suppliers. To find out more about the latest GST/HST imposed on digital economy businesses, you can visit the CRA website.
This may impact which products or services we write about and where and how they appear on the site. It does not affect the objectivity of our evaluations or reviews. The penalty can go up to a maximum of $2,500 according to the QST tax regulation.
- You can use this chart to have a quick overview of the tax requirement of one province to another in Canada.
- The Harmonized Sales Tax (HST) is a combination of the federal GST and the provincial sales tax (PST).
- Businesses must charge GST if they are registered for GST and make taxable sales, leases, or other supplies in Canada.
- Make sure to track deadlines carefully, as failing to remit your sales tax on time can result in penalties and interest charges.
- Implemented in 1991, this tax is set at a flat rate of 5 percent across the entire country.
The PST rates can vary significantly from province to province, typically ranging from 6% to 9%. In some provinces, PST applies to a broader range of goods and services, while in others, it may be limited to specific categories. Businesses operating in PST provinces must register for PST accounts, collect the tax from customers, and remit it to the provincial tax authority. Compliance with PST regulations can be complex, especially for businesses operating in multiple jurisdictions, as they must navigate different tax rates and filing requirements. Businesses registered for GST are responsible for collecting the tax from customers and remitting it to the Canada Revenue Agency (CRA). They must also file regular GST returns and are eligible to claim input tax credits for GST paid on business expenses.
Charge and collect the tax – Which rate to charge
British Columbia and Manitoba both have a 7% PST, so the total sales tax combined with GST is 12% in those provinces. Quebec has a 9.975% PST, resulting in a 14.975% total sales tax. Saskatchewan has a 6% PST, so the total sales tax combined with GST is 11%.Harmonized Sales Tax (HST) is a combination of GST and PST that exists in some provinces.
There are certain groups of people in Canada that are exempted from remitting tax returns. Due to the different tax regulations in each province, selling goods and services to another province or territory is not as straightforward for Canadian businesses. Navigating Canada’s tax system can be overwhelming, especially for businesses involved in interprovincial commerce or imports. No, businesses with annual revenues below $30,000 are not required to charge GST but can choose to register voluntarily. In other words, the seller does not charge you GST for such goods and services. If you are paying the HST, such as 13% in Ontario, you add 13% on top of the retail selling price.
- Consequently, GST in Canada is divided into a combination of GST, HST (Harmonized Sales Tax) and PST (Provincial Sales Tax).
- The interplay between GST, PST, and HST can be complex due to the varying rates and rules across provinces.
- You need an expert who can help you figure out which taxes you need to pay and when.
For example, British Columbia charges a 7% PST, while Saskatchewan charges 6%. Note that in Quebec, this tax is referred to as QST and is set at a rate of 9.975%. It’s important to note that PST only applies to goods and services within the specific province that imposes it. So, if you’re selling a $1,000 computer in British Columbia, you would charge an additional $70 in PST and $50 in GST, totaling $1,120. For instance, provinces may increase or decrease their HST/PST rates, or introduce new exemptions or rules for specific industries. It’s essential to stay updated on any changes in tax legislation that could affect your business.
However, businesses with revenue greater than $6 million annually and some financial institutions will have a maximum two-year deadline. Once your GST/HST account is all set, you can start charging your customers on the GST/HST on the taxable goods and services you sell to them. Businesses will have to collect GST/HST for any supply of property and services to the federal government. The federal government refers to the government departments, branches, agencies and includes some corporations. You must charge either HST or GST/PST according to the destination provincial/territorial rates, which is also known as the place of supply. If you supply zero-rated and exempted supply, there is no need to charge GST/HST rate from your customers.
Harmonized Sales Tax (HST): Streamlined Taxation
With all the similar-sounding acronyms swirling around, it can be difficult to determine which taxes apply to you. It can be especially difficult if you are a non-Canadian doing business in Canada. It differs from both European VAT and American sales tax.If you are a non-resident doing business in Canada, you’re still held responsible for initially paying the proper import tax. Click here to find out how.It’s important to be well-informed about Canadian sales taxes because they influence your prices, the customs process, and the overall success of your business. Once you understand the differences between GST, HST, and PST, you’ll be ready to tackle the Canadian import-export market.
Provincial Sales Tax
Currently, there are only three provinces in Canada that levy PST/RST, with RST tax rates ranging from 6% to 10% and varying from province to province. If you are importing goods to the US, you may be curious to know about the US sales tax system. These do not apply to imports, however.When importing into the US, you will be required to pay duties that range from 0% to 37%. If your country is part of a free trade agreement with the US, you may be exempt from customs duties. You need an expert who can help you figure out which taxes you need to pay and when. We know the specifics when it comes to Canadian taxes, and we’ll make sure your business is well taken care of.
Step 4: Remit the Collected Taxes
GST, or Goods and Services Tax, is a federal tax applied to most goods and services sold in Canada. This tax is collected at each stage of the supply chain, from production to the point of sale. The current rate of GST is 5%, so, for example, if a shopper buys a $100 dress, the final price would be $105 with GST included. For consumers, PST means that the total cost of goods and services can vary depending on the province of purchase. Some provinces offer exemptions for certain items, such as children’s clothing, books, and safety equipment, which can affect the overall tax burden. Understanding the specifics of PST in each province can help consumers and businesses alike manage their finances more effectively and avoid unexpected costs.
If you are doing business in these provinces, you only need to collect one type of tax. The PST is gst pst canada a provincial tax that varies by province, while the GST is a federal tax with a consistent rate of 5% across Canada. The sales tax in NL is based on the HST system and comprises a federal GST component (5%) and a 10% provincial sales tax.
You must file a GST/HST return even if you do not have business transactions or no net tax to remit. The GST/HST return report is the tax return report that you have to file and submit to the Canada Revenue Agency (CRA) on the deadline of your reporting period. Input Tax Credit is the credit that you can claim from Canada Revenue Agency (CRA) for the sales tax you have paid on goods purchased to produce your goods and services. However, not all circumstances exempt the indigenous people from remitting GST/HST. If they are importing any taxable goods and services to Canada, they must pay GST/HST for the imported items. Hence, if you are selling to customers residing in another province in Canada, you should apply their tax rate in your invoices rather than yours.
CPBCanada.org neither investigates nor endorses any products or services displayed in the advertisements on this site. Prior to making a significant financial choice, it is advisable to seek guidance from a competent professional. Four Canadian provinces Ontario, Newfoundland and Labrador, Nova Scotia, and New Brunswick do not collect PST. They instead collect HST or Harmonized Sales Tax which currently sits at 13%. Unfortunately, the number of goods and services that are not exempt from GST is a lot more than those which are zero-rated. Earn high-interest rates on a free savings account (3.70% savings offer).
Your PST return filing is on time if the Minister of Finance receives the return and payment by 20th of the month. In Saskatchewan, PST is 6% of the taxable goods and services consumed or used here. Hence, your late penalty is a total of $525 to be remitted to the Canada Revenue Agency. Keeping track of your tax filing is your responsibility as a business owner in Canada.