What You Need to Know About Canada Sales Tax (GST/HST)

Canada's sales tax is anything but uniform. Depending on which province your customer is in, you could be charging 5% GST, 13% HST, 15% HST, or GST plus a separate provincial sales tax. Getting the rate wrong on even one cross-border invoice can trigger CRA penalties and messy corrections. Here is how the system works and what you need to do to stay on the right side of it.

1. What is GST/HST?

GST (Goods and Services Tax) is a federal consumption tax of 5% that applies to most goods and services sold in Canada. In some provinces, the federal GST is combined with the provincial sales tax (PST) into a single Harmonized Sales Tax (HST).

Here are the current rates by province and territory:

GST only (5%): Alberta, British Columbia, Manitoba, Saskatchewan, Northwest Territories, Nunavut, Yukon
HST 13%: Ontario
HST 15%: New Brunswick, Newfoundland and Labrador, Nova Scotia, Prince Edward Island
GST + QST: Quebec charges 5% GST plus 9.975% Quebec Sales Tax (QST) separately

British Columbia, Manitoba, and Saskatchewan charge GST plus their own separate Provincial Sales Tax (PST).

2. Who does it apply to?

This usually applies to:

Businesses with annual worldwide taxable revenue above $30,000 (the small supplier threshold)
Businesses that voluntarily register for GST/HST
Self-employed individuals and freelancers above the threshold
Non-resident businesses selling to Canadian consumers in some cases
E-commerce businesses selling digital products or services to Canadian customers

3. Why does it matter?

Understanding GST/HST helps you:

Stay compliant with the CRA and provincial tax authorities
Avoid penalties and interest on late filings
Keep proper records of all taxable supplies and input tax credits
File and pay correctly based on your province and filing frequency
Plan your cash flow better by setting aside collected tax

4. How does it work?

Here's the basic process:

Register for a GST/HST account with the CRA when your revenue exceeds $30,000 (or voluntarily before that)
Charge the correct GST/HST rate on your taxable sales based on the place of supply
Collect the tax from your customers and track it separately
Claim Input Tax Credits (ITCs) for the GST/HST you paid on business purchases
File your GST/HST return with the CRA (monthly, quarterly, or annually)
Remit the difference between tax collected and ITCs claimed

5. What forms are involved?

GST/HST Return (GST34) - The main return used to report your GST/HST collected, input tax credits, and net tax owing or refund
GST/HST Registration Form (RC1) - Used to register your business for a GST/HST account with the CRA
Quick Method Election (GST74) - Used to elect the Quick Method of accounting, which simplifies GST/HST calculation for eligible small businesses
QST Return - Filed separately with Revenu Quebec if you operate in Quebec

6. What information do you need?

Before handling GST/HST, make sure you have:

Your GST/HST business number (BN) from the CRA
Records of all taxable sales with GST/HST collected
Records of all business purchases with GST/HST paid (for ITCs)
Invoices that show the GST/HST amount separately
Details of zero-rated and exempt supplies
Place of supply information for multi-province sales
Your assigned filing frequency (monthly, quarterly, or annual)

7. Important deadlines

Filing frequency: Monthly (revenue over $6 million), quarterly (revenue $1.5 million to $6 million), or annually (revenue under $1.5 million)
Payment deadline: One month after the end of your reporting period for monthly and quarterly filers. Three months after your fiscal year-end for annual filers
Annual filer instalment payments: Quarterly instalments may be required if your net tax exceeds $3,000

For example, if you file quarterly and your quarter ends March 31, your return and payment are due by April 30.

8. Common mistakes to avoid

Charging the wrong rate when selling across provincial borders (place of supply rules apply)
Missing the $30,000 registration threshold and failing to register on time
Not claiming all eligible Input Tax Credits on business expenses
Mixing up GST/HST and QST reporting requirements in Quebec
Forgetting to charge HST on digital products and services
Not keeping proper invoices that show the GST/HST registration number
Missing instalment payments for annual filers

9. Simple example

You run a consulting business in Ontario and invoice a client $5,000 plus HST.

You charge 13% HST: $5,000 x 13% = $650
Your total invoice is $5,650
During the same quarter, you spend $2,000 plus HST on business expenses
HST on expenses (your ITC): $2,000 x 13% = $260
Net tax owing: $650 (collected) - $260 (ITCs) = $390
You remit $390 to the CRA with your quarterly return

If you sold to a client in Alberta instead, you would only charge 5% GST ($250), since Alberta does not have HST.

10. FAQ

Q: Do I have to register for GST/HST? A: You must register once your worldwide taxable revenue exceeds $30,000 in a single calendar quarter or over the last four consecutive calendar quarters. You can register voluntarily below this threshold.

Q: What is the Quick Method? A: The Quick Method lets eligible small businesses (revenue under $400,000) remit a flat percentage of their GST/HST-inclusive revenue instead of tracking ITCs on every purchase. This simplifies filing.

Q: Do I charge GST or HST? A: It depends on where your goods or services are supplied. If the place of supply is a participating province (Ontario, New Brunswick, Nova Scotia, Newfoundland, PEI), you charge HST. Otherwise, you charge GST.

Q: Can I claim ITCs on all business purchases? A: You can claim ITCs on most purchases related to your commercial activities. However, some items are restricted, such as meals and entertainment (50% limit) and personal-use items.

Q: What happens if I file late? A: The CRA charges a penalty of 1% of the amount owing, plus 0.25% for each complete month the return is late, up to a maximum of 12 months.

11. Final takeaway

Canadian sales tax varies by province, from 5% GST to 15% HST. Register with the CRA when your revenue exceeds $30,000, charge the correct rate based on the place of supply, claim your ITCs, and file your returns on time.

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What you need to know about Canada sales tax (GST/HST): Federal GST is 5%, and HST ranges from 13% to 15% depending on your province. Register, collect, and file on time to stay compliant.

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