Sales Tax 101: What You Need to Know to Run a Small Business in Canada
Ack! The dreaded (but necessary) taxation of your small business. Wherever you reside and operate in Canada, you can be sure that there will be some sales tax you’ll need to charge, collect and reconcile come tax time. Here’s what you need to know:
Does my business have to collect sales tax?
If your business sells goods and services in Canada you must collect GST or HST (province dependent) unless your business qualifies as an exception.
Exceptions for Charging GST/HST;
1. Small Supplier Rule
Your total revenues (including any international sales and zero-rated revenues in this calculation) must be less than $30,000 in a single calendar quarter
2. Selling Zero-Rated or Exempt Goods or Services
There is no difference to your customers if you’re Zero-Rated or Exempt, but there is a big difference to your business.
If you’re zero-rated, you CAN claim the sales tax back on purchases you made for your business. Example – basic groceries, medical devices, financial services, prescription drugs
If you’re exempt, NO sales tax can be claimed.
Ex. residential housing, music lessons, many education services
Federal and Provincial Sales Taxes
Registering for a sales tax account will depend on what province you’re in. You’ll need to collect and ensure filing is accurate based on the requirements of each.
So how do you charge tax?
Sale of Goods
The tax you charge your customer depends on where your order is placed and being shipped (customer’s billing address). International orders (outside of Canada) do not have sales tax added.
Services
Sales tax is charged based on the service recipient’s address.
Sales Tax Rates by Province
Province or Territory | HST | GST | PST/RST/QST |
Alberta | 5% | ||
British Columbia | 5% | 7% PST | |
Manitoba | 5% | 8% RST | |
New Brunswick | 15% | ||
Newfoundland and Labrador | 15% | ||
Northwest Territories | 5% | ||
Nova Scotia | 15% | ||
Nunavut | 5% | ||
Ontario | 13% | ||
Prince Edward Island | 15% | ||
Quebec | 5% | 9.975% QST | |
Saskatchewan | 5% | 6% PST | |
Yukon | 5% |
Disclosure
Your GST/HST number is not private. It must be visible on all your invoices and receipts.
Reporting Periods
You will be assigned a reporting period when you register for your GST/HST number. Be sure to check your online CRA account and not to miss any filing deadlines.
Bookkeeping for GST/HST
Getting a good understanding of how your accounting program handles your sales tax is imperative to keeping these accounts organized and making sense of everything when it comes time to file.
GST/HST Collected on Sales
GST/HST Paid of Purchases (ITCs)
GST/HST Installments (Paid to the CRA)
Basically, it breaks down to this. The tax you have to charge is based on where you live AND where your client lives. Hiring a bookkeeper and accountant can support you in making sure your taxation is correct. If you don’t have someone to call to confirm, call the CRA GST/GST Technical Enquiries @ 1.800.959.8287.
