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Sales Tax

The Goods and Services Tax (GST) and Harmonized Sales Tax (HST) applied to most goods and services in Canada.

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Comprehensive Guide to Sales Tax in Canada

Sales tax in Canada is a key consideration for both residents and visitors, as it applies to most goods and services purchased across the country. However, the structure, rates, and exemptions vary depending on the province or territory. This guide provides a detailed overview of how sales tax works in Canada, including national regulations, provincial variations, exemptions, and rebates.

1. Overview of Sales Tax in Canada

Canada has a multi-tiered sales tax system that includes:

  • Goods and Services Tax (GST): A federal tax applied across Canada.
  • Provincial Sales Tax (PST): A tax levied by some provinces in addition to the GST.
  • Harmonized Sales Tax (HST): A combined federal and provincial tax used in certain provinces.

Key Points:

  • The GST is set at a flat rate of 5% and applies to most goods and services across Canada.
  • Provinces and territories either:
    • Charge a separate PST (rates vary by province),
    • Combine the GST and PST into a single HST, or
    • Have no additional provincial sales tax (e.g., Alberta).
  • Sales tax is typically not included in the displayed price of goods and services, so the final cost at checkout will be higher than the sticker price.

2. Sales Tax Rates by Province and Territory

The total sales tax rate you pay depends on where you make your purchase. Below is a breakdown of sales tax rates across Canada as of 2023:

| Province/Territory | GST (%) | PST (%) | HST (%) | Total Tax Rate (%) | Notes | |-------------------------|-------------|-------------|-------------|------------------------|-----------| | Alberta | 5 | 0 | N/A | 5 | No PST. | | British Columbia | 5 | 7 | N/A | 12 | GST + PST. | | Manitoba | 5 | 7 | N/A | 12 | GST + PST. | | New Brunswick | N/A | N/A | 15 | 15 | HST. | | Newfoundland & Labrador | N/A | N/A | 15 | 15 | HST. | | Northwest Territories | 5 | 0 | N/A | 5 | No PST. | | Nova Scotia | N/A | N/A | 15 | 15 | HST. | | Nunavut | 5 | 0 | N/A | 5 | No PST. | | Ontario | N/A | N/A | 13 | 13 | HST. | | Prince Edward Island | N/A | N/A | 15 | 15 | HST. | | Quebec | 5 | 9.975 | N/A | 14.975 | GST + QST (Quebec Sales Tax). | | Saskatchewan | 5 | 6 | N/A | 11 | GST + PST. | | Yukon | 5 | 0 | N/A | 5 | No PST. |

3. What Goods and Services Are Taxed?

Taxable Goods and Services:

  • Most tangible goods (e.g., clothing, electronics, furniture).
  • Services such as restaurant meals, hotel stays, and professional services.
  • Digital products and services (e.g., streaming subscriptions, e-books).
  • Alcoholic beverages and tobacco products.

Exemptions:

Certain goods and services are exempt from sales tax or are zero-rated (taxed at 0%). These include:

  • Basic groceries: Unprocessed food items like bread, milk, fruits, and vegetables.
  • Prescription medications: Most prescription drugs are tax-exempt.
  • Medical devices: Items like hearing aids, wheelchairs, and prosthetics.
  • Educational services: Tuition fees for schools, colleges, and universities.
  • Childcare services: Daycare and babysitting services are generally exempt.
  • Residential rent: Long-term rental housing is not subject to sales tax.

Zero-Rated Goods and Services:

  • Exports (goods sold to customers outside Canada).
  • Certain agricultural and fishing products.

4. Rebates and Refunds

GST/HST Rebates for Residents:

  • GST/HST Credit: Low- and moderate-income individuals and families may qualify for a quarterly tax-free payment to offset the GST/HST they pay. Eligibility is determined when you file your income tax return.
  • New Housing Rebate: If you purchase a newly built home or substantially renovate an existing one, you may qualify for a partial rebate of the GST/HST paid.

Rebates for Visitors:

  • Canada does not offer a general sales tax refund program for tourists. However, visitors may be eligible for a rebate on GST/HST paid on certain goods exported from Canada (e.g., goods shipped directly to a foreign address).

5. How Sales Tax Is Collected

  • Sales tax is collected at the point of sale by businesses and included in the final price at checkout.
  • Businesses are responsible for remitting the collected tax to the appropriate government authority (federal or provincial).

6. Special Considerations

Online Purchases:

  • Sales tax applies to online purchases, including those from international retailers, if the seller has a significant presence in Canada or ships goods to Canadian addresses.
  • Digital services (e.g., Netflix, Spotify) are also subject to GST/HST.

Small Businesses:

  • Businesses with annual revenue below $30,000 are generally not required to register for GST/HST. However, they may choose to do so voluntarily.

Provincial Variations:

  • Quebec administers its own sales tax system (QST) separately from the federal GST.
  • In provinces with HST, the tax is administered jointly by the federal and provincial governments.

7. Tips for Newcomers and Visitors

  1. Understand the Final Price: Always account for sales tax when budgeting for purchases, as it is added at checkout and not included in the sticker price.
  2. Keep Receipts: If you are eligible for rebates (e.g., new housing rebate), you will need proof of purchase.
  3. Learn Provincial Rules: If you move between provinces, familiarize yourself with the local sales tax structure.
  4. Use Tax Calculators: Online tools can help you estimate the total cost of goods and services, including sales tax.

8. Conclusion

Sales tax in Canada is a complex but manageable aspect of daily life. Understanding the federal GST, provincial PST, and harmonized HST systems will help you navigate purchases and avoid surprises at checkout. Whether you're a resident, newcomer, or visitor, being aware of exemptions, rebates, and provincial variations ensures you can make informed financial decisions.