Sales tax in Canada is essentially the same as the European VAT or value added tax, except that Canada calls it GST, or goods and services tax. Most of Canada’s provinces also have some form of their own provincial sales tax, which is added to the Canada-wide GST. In some provinces, the provincial sales tax is added on to the federal rate. In others, the provincial tax and the federal tax are combined into one rate, which is called the Harmonized Sales Tax. No matter what the tax is called, it is all calculated the same way – one flat percentage on all eligible goods and services.
Federal and provincial rates
The federal GST tax rate is 5%, applicable across all provinces and territories of Canada. The following chart details the provincial or harmonized sales tax for each individual province. The harmonized sales tax rate includes the federal 5% in the total amount. First Nations land is not subject to any federal or provincial tax but instead maintains its own sales tax.
| Province or territory | General sales tax | Provincial sales tax | Harmonized sales tax |
| Alberta | 5% | – | – |
| British Columbia | 5% | 7% PST | – |
| Manitoba | 5% | 7% RST (retail sales tax) | – |
| New Brunswick | – | – | 15% |
| Newfoundland and Labrador | – | – | 15% |
| Nova Scotia | – | – | 15% |
| Ontario | – | – | 13% |
| Prince Edward Island | – | – | 15% |
| Quebec | 5% | 9.975% QST (Quebec sales tax) | – |
| Saskatchewan | 5% | 6% PST | – |
| Northwest Territory | 5% | – | – |
| Nunavut | 5% | – | – |
| Yukon | 5% | – | – |
| First Nations territories | – | 5% FNGST (First Nations general sales tax) | – |
Location-based calculation
One key point to understanding sales tax in Canada is that it is levied based on where your customers are, and not necessarily where your business is located. For brick-and-mortar businesses, this is not a problem, but online businesses must charge the applicable taxes to their customers for each province in which the business has an economic presence. This applies both to Canadians who do online sales and non-residents who sell their product or service online to Canadians. Non-residents who do business in Canada must register for the GST/HST in order to remit sales tax collected. Canadian online retailers are not required to collect sales tax on international orders, so long as the shipping address is outside Canada.
If you are doing business through a large online platform such as Amazon or Etsy, the sales tax calculation and remittance part of your business will be handled for you by the platform. However, if you sell products or services to Canadians through your own website, and do not qualify as a small supplier, you will be required to register for GST to do business in Canada.
Exceptions and exemptions
Canada does offer an exception for “small suppliers,” or businesses that do not exceed $30,000 in total sales in a year. These businesses can choose to register to collect GST to remit, and are encouraged to do so if the business owner expects to grow past the $30,000 mark, but are not required to do so.
There are also exemptions for certain groups of people who are not required to pay sales tax in Canada, including First Nations members, diplomats, and government agencies.
Managing sales tax compliance can be a real hassle! Filing reports accurately and keeping track of due dates takes time and creates mistakes. That leads to hours spent sorting through complex calculations just because you don’t want an audit letter in the mail. We created TwinkleTax just for this purpose of simplifying sales tax. Have more questions? Drop us a note, we will be happy to answer your questions.
