As a Canadian business owner, you should be keen as to when and how to charge sales tax for the goods and services you sell to customers. If you sell goods or provide services in Canada, you are required to collect sales tax from the customers. Depending on which town or province you operate your business, you will need to collect a combination of the Goods and Services Tax and the Provisional Services Act, the Goods and Services Tax only, or the Harmonized Sales Tax. The Harmonized Sales Tax combines PST with GST to create one tax.
Charging Tax To Out-Of-Province Customers
If you are a vendor in one province or territory and make sales to residents of another province or territory, you will still need to charge sales tax. The sales tax that applies in your customer’s province or territory is generally applicable.
What Goods And Services Are Taxable?
Many retail goods and services are subject to GST/HST. Supplies such as basic groceries, prescription drugs, most livestock and many agricultural and fishery products are zero-rated. If a product is zero-rated, the GST/HST still applies to them, but at a rate of 0%. Other supplies such as child care, health, dental and legal aid services, residential rentals and music lessons are GST/HST exempt. Goods and services that are zero-rated are permissible to claim input tax credits, while you cannot do so for goods and services that are exempt.
You’ll first need to register for a GST/HST account through the Canada Revenue Agency or Revenu Quebec (if you are in Quebec). A business that is a sole proprietorship, partnership or corporation with $30,000 or less in total revenue in the last four consecutive calendar quarters or in any single calendar quarter does not need to register for a GST/HST account. Once you begin collecting GST/HST, you are required to inform your customers.