Running a business in Canada means navigating a few taxes that come into play with almost every sale.
We’re talking about GST, HST, and PST—the three pillars of our sales tax system in Canada.
These aren’t just acronyms. They affect your price, your tax charged on invoices, and how much you owe the Canada Revenue Agency (CRA).
And depending on which province you’re operating in Canada, things can get even more interesting.
Key Takeaways
- Goods and services tax (Canada) is a value-added tax applied federally at 5%
- Harmonized sales tax combines GST and provincial sales tax in select regions
- PST is used independently in provinces like British Columbia, Saskatchewan, and Manitoba
- You may need to register for PST or must register for GST depending on what and where you sell
- Input tax credit claims and reporting vary by jurisdiction and follow rules from the CRA or provincial bodies
Understanding the Goods and Services Tax (GST)
What is GST?
GST, or the Goods and services tax, is a 5% federal sales tax on most goods and services sold in Canada.
It’s a type of consumption tax similar in structure to the Goods and services tax in Australia and governed under the Excise Tax Act.
It applies to everything from real property to software, unless it’s under a tax exemption (e.g., basic groceries, prescription drugs).
When do you need to charge GST?
If your revenue hits over $30,000 in annual taxable supplies, you must register with the CRA and start charging GST.
This includes:
- Charging GST on goods and services in Canada
- Reporting through CRA’s online system
- Submitting returns and claiming input tax credits when eligible
Where is GST used?
GST is the only applicable tax in Alberta, Yukon, Nunavut, and Northwest Territories. No provincial sales tax is added.
In other provinces, GST may be combined with PST or included in HST.
What is the Harmonized Sales Tax (HST)?
How GST and PST combine
The Harmonized Sales Tax is a blended tax that merges the federal GST and the provincial sales tax into a single rate.
This approach was adopted by some provinces to streamline tax collection, improve tax compliance, and simplify filings for businesses.
HST provinces
HST applies in:
- Ontario – 13%
- Nova Scotia – 14%
- New Brunswick – 15%
- Prince Edward Island – 15%
- Newfoundland and Labrador – 15%
Charging HST as a business
In these provinces, businesses:
- Charge HST on all goods and services sold in Canada
- Claim input tax credits for expenses like imported goods, utilities, and property used in business
- File HST returns through the Canada Revenue Agency
What About PST?
What is PST?
Provincial Sales Tax (PST) is a sales tax administered by individual provinces that haven’t adopted HST.
It applies to:
- Tangible goods
- Software, subscriptions, and digital goods
- Select services, including meals, drinks, and repair fees
PST provinces
Used in:
- British Columbia – 7%
- Saskatchewan – 6%
- Manitoba – 7%
Each jurisdiction has its own PST rate, registration requirements, and legislation.
Collecting and reporting PST
Businesses must:
- Determine which goods or services are taxable
- Register with their provincial tax office
- Itemize PST on every invoice
- Remit collected tax on time to the province
GST vs HST: What’s the Difference?
The difference between GST and HST boils down to structure and administration:
- GST is a standalone 5% federal tax
- HST includes both federal GST and the provincial portion, typically 13%–15%
Whether you apply HST or separate GST/PST depends on your province, your customers’ locations, and what’s being sold.
Canada vs US Sales Tax
In the United States, sales taxes are set and collected by states and municipalities — no national value-added tax exists.
In Canada, the CRA centrally administers GST/HST, with streamlined systems for tax refund, credit, and input tax credit eligibility.
If you’re shipping from Canada to US customers:
- Know customs and export rules
- Check if taxation of digital goods applies differently in each country
- In most cases, GST/HST won’t apply to US sales, but sales taxes in the United States may require registration
Province by Province Breakdown
HST Provinces
In provinces like:
- Ontario
- Nova Scotia
- Prince Edward Island
- Newfoundland and Labrador
Businesses charge one HST rate and file through the Canada Revenue Agency.
PST Provinces
British Columbia, Saskatchewan, and Manitoba maintain standalone sales tax systems.
This includes distinct rules for alcoholic beverages, meals, real property, and specific software licenses.
Quebec’s Twist: QST
Quebec runs its own value-added tax called QST, administered by Revenu Québec.
If you’re registered in Quebec, you’ll remit both QST and GST to provincial authorities separately from the CRA.
Charging Tax as a Business Owner
You’ll need to register if:
- You hit $30,000 in annual taxable revenues from goods or services sold
- You offer taxable supplies in Canada, like software, real property, or consulting
Calculating the right tax
- Verify your jurisdiction’s rules and PST rate
- Know the current GST rate and HST rate for your province
- Clearly itemize each tax charged on the invoice
- Ensure you’re capturing credits, claiming your input tax credit, and filing with the correct tax authority
Interprovincial and online sales?
The customer’s location often determines the tax applied.
For example:
- You may charge HST to Ontario clients
- You may collect PST separately for BC customers
- Digital goods and services follow destination-based tax rules
Real Examples: What Tax Applies?
Ontario vs Alberta
- Selling in Ontario? You charge 13% HST
- Selling in Alberta? Only 5% GST applies, no provincial tax
Services across provinces
- Designer based in Saskatchewan billing a client in Ontario?
- Depending on the services sold, you may apply GST only or HST if required
Digital products
- Selling software to someone in Prince Edward Island? Charge 15% HST
- Selling to Manitoba? Charge 5% GST + 7% PST
FAQs: GST vs HST
What is the difference between GST and HST?
GST is a federal tax at 5%, while HST combines federal and provincial taxes into one rate (13–15%) in certain provinces.
Do I need to register for both GST and PST?
Yes, if you operate in a PST province. You’ll register for GST/HST with the CRA and PST with the respective provincial government.
What happens if I charge the wrong tax?
You could face CRA penalties, interest charges, and the requirement to amend or refund customer invoices.
How do I claim input tax credits?
You’ll track GST/HST paid on business expenses, then deduct that amount when filing your returns.
What are the penalties for not registering?
If you’re required to register and don’t, the CRA can assess interest, deny your ITCs, and apply backdated tax obligations.
Conclusion
Whether you’re selling digital goods, meals, subscriptions, or real property, understanding how GST, HST, and PST work in your province is important.
From the Canada Revenue Agency to Revenu Québec, each jurisdiction has its own tax handling and requirements.
If you’re running a business in Toronto and want help navigating sales taxes in Canada, Good Monday can walk you through your GST/HST obligations, filings, and how they apply specifically to Ontario’s 13% HST — no jargon, no guesswork.
Let’s simplify your tax compliance in Toronto, so you can focus on growing your business in the city.
Published by Vira Marketing
