According to data provided by the Government of Canada, goods and services tax (GST) accounted for more than 3.2 billion CAD in revenue for the fiscal year 2020-2021. GST, along with the harmonized sales tax (HST), and non-refundable provincial sales tax (PST), all comprise a substantial portion of the country’s revenue each year.
All businesses – whether resident or non-resident – that sells goods or services in Canada must understand when to pay or collect the applicable GST, HST, and/or PST, depending on the specific location in which the good or service is being sold. Not every province has adopted the HST. As such, a Canada sales tax guide is a helpful tool for any business wishing to sell goods or services in Canada. Consider reaching out to Jeremy Scott Law for further Canadian tax guidance by calling (902) 403-7201 today for an initial consultation.
What Is the Goods and Services Tax (GST) in Canada?
The GST is Canada’s federal sales tax, which is applicable to most goods and services sold in Canada, as well as the sale of real property, intangible personal property, and digitized products downloaded from the internet. However, the way the GST is collected differs by province or territory. Presently, the federal GST rate in Canada is 5 percent.
The GST has become a major topic for non-resident and digital businesses selling goods and services in Canada. According to the Canada Revenue Agency (CRA), as of July 1, 2021, many digital businesses will be responsible for paying the GST. Because non-resident digital businesses (many of which are based in the United States) may be unfamiliar with Canadian tax law, utilizing a Canada sales tax guide to a critical tool to legal compliance.
What is the Harmonized Sales Tax (HST) in Canada?
The HST is a combination of the federal GST and a province’s provincial tax rate (where the province has opted into the harmonized tax system). The HST rate includes the 5 percent GST plus the local, provincial tax rate, which is typically between 8 and 10 percent. As such the total combined HST rate (inclusive of both the federal and provincial portions) is currently 13 or 15 percent. Whether a province has adopted the HST is critical when planning to operate a business in Canada (either physically or virtually). At Jeremy Scott Law, we ensure our clients have a solid understanding of their legal rights and obligations when choosing to sell goods or services in Canada.
What Is the Non-Refundable Provincial Sales Tax (PST)?
The PST is a province’s local sales tax and is charged separately from the GST. It is found only in some some provinces. As further identified in the table below, the PST is known as the retail sales tax (RST) in Manitoba, and known as the Quebec sales tax (QST) in Quebec. This table provides a basic Canada sales tax guide for businesses who are beginning the process of considering the sale of goods or services in Canada. Please note these are the rates as of February 1, 2022 and should be confirmed with the appropriate tax authorities.
Canadian Sales Taxation Table
| PROVINCE | PST/RST/QST | GST | HST | TOTAL |
| Alberta | N/A | 5% | N/A | 5% |
| British Columbia | 7% (PST) | 5% | N/A | 12% |
| Manitoba | 7% (RST) | 5% | N/A | 12% |
| New Brunswick | N/A | N/A | 15% | 15% |
| Newfoundland/Labrador | N/A | N/A | 15% | 15% |
| Northwest Territories | N/A | 5% | N/A | 5% |
| Nova Scotia | N/A | N/A | 15% | 15% |
| Nunavut | N/A | 5% | N/A | 5% |
| Ontario | N/A | N/A | 13% | 13% |
| Prince Edward Island | N/A | N/A | 15% | 15% |
| Quebec | 9.975% (QST) | 5% | N/A | 14.975% |
| Saskatchewan | 6% (PST) | 5% | N/A | 11% |
| Yukon | N/A | 5% | N/A | 5% |
How a Canada Tax Lawyer Can Help Your Business
Following federal and provincial/territorial tax laws is paramount to avoiding an audit, along with potential monetary and criminal consequences. Canada’s sales tax structure can be complex and challenging, and businesses considering the sale of goods or services in Canada may find it helpful to work alongside an experienced and knowledgeable Canadian tax lawyer. Working with a legal professional is especially important to consider for businesses that are not based in Canada, as many non-resident businesses have flooded the goods and services industry in Canada.
Assistance Registering a Business for GST/HST
With the recent change in Canadian tax laws, businesses may not know whether they need to register for the GST/HST. Businesses that are non-residents or businesses that sell digital products must follow a new set of requirements. A Canada tax law guide provided by a qualified lawyer can help to answer the general questions many new businesses may have.
Additionally, a business may be involved in an ‘exempt’ activity and may not be obligated to register for and collect the GST/HST or PSTs. A failure to register as required under Canadian tax law is certainly a legal misstep that every business should avoid. With the influx of online businesses that sell products through Amazon and other marketplaces (with many of these online businesses being located in the United States), an entirely new industry will need to adapt to current goods and services tax laws in Canada.
Avoiding Costly Mistakes
Under Canadian tax laws, some items are exempt from GST, HST, and/or local, provincial taxes. Additionally, a business may not be responsible for collecting sales taxes if the business does not meet certain minimum revenue thresholds. In addition, some businesses mistakenly believe certain goods and services they sell in Canada are exempt from sales tax when they are not.
A minor misunderstanding of the law can have astronomical financial and legal consequences. Whether intentional or not, a failure to comply with Canadian tax laws may result in a wide range of legal consequences, and may even leader to a business being prohibited from selling goods and services in Canada. A qualified Canada tax lawyer provides businesses with the information they need to ensure minor mistakes do not have catastrophic consequences.
Contact Canada Tax Lawyer Jeremy Scott Today
Are you a business selling goods or services in Canada? Are you a business planning to sell goods or services in Canada, whether in a storefront or online? If so, a Canada sales tax assessment may be right for you. At Jeremy Scott Law, we assist businesses with various tax matters, including issues involving GST, HST, and PST. To schedule an initial consultation to discuss your situation, and receive answers to your tax questions, contact our office today by calling (902) 403-7201.
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The Disclaimer:
Please note the content above and throughout this website is provided for general information purposes only and does not constitute legal or other professional advice or an opinion of any kind. I urge you to seek specific legal advice by contacting me (or your current legal counsel) regarding any legal issues you may face. I do not warrant or guarantee the quality, accuracy or completeness of any information found on this website and will not be held liable for anything contained in this document or any use you make of it. Finally, accessing the information on my website does not create a lawyer-client relationship.