The harmonized sales tax (HST) in Canada is a consumption tax paid by residents and local businesses. The federal goods and services tax and several provincial sales taxes are “harmonized,” as the word suggests.

The HST is used in five provinces of Canada. Check out our HST sales tax calculator to see your rate.

HST proponents contend that by reducing administrative costs, which lowers consumer prices, the HST increases the competitiveness of Canadian firms. 

The Federal Goods and Services Tax (GST) and Provincial Sales tax (PST) were combined to establish the Harmonized Sales Tax (HST).

The Harmonized Sales Tax applies to most of the goods and services provided in Newfoundland and Labrador (HST).

The HST has been used by the province of Newfoundland and Labrador starting from July 1, 1997. The HST operates similarly to GST, which is in effect across Canada and is levied on the same classes of goods and services.

According to the government, the provincial HST rate in Newfoundland and Labrador increased from 8% to 10% as of July 1, 2016.

The Federal Goods and Services Tax (GST), which was previously 5%, is now 10% on top of the provincial component to create the new HST rate of 15%.

The HST is a tax imposed by the Canadian government in line with the Excise Tax Act of Canada. In addition, the HST is handled by the Canada Revenue Agency.

The Comprehensive Integrated Tax Coordination Agreement (CITCA) was signed between the federal government and the participating provinces.

The agreement permits the province to alter the tax rate used to calculate the provincial part of the tax once every calendar year.

A mechanism for revenue sharing between the federal government and provinces participating in the HST is included in CITCA agreements, which stipulate that the GST and provincial sales taxes use the same tax base.

Origin Of Sale Tax In Canada

In 1920, Canada introduced the first sales taxes, including the Manufacturers’ Sales Tax (MST), to pay for World War I. It had a detrimental effect that the MST was charged at every stage of the production process.

The MST was eliminated in 1991 in favor of the GST. Input tax credits (ITCs), which avoid double taxation, are one of the improvements people can use when making purchases.

This modification to the GST was enacted with the exception of Quebec, which adopted its type of value-added tax (QST). GST rates were reduced from 7% to 5% between 2006 and 2008.

HST, a value-added tax that combined PST and GST, was introduced in several provinces after 1996. The HST is currently in force in New Brunswick, Ontario, Prince Edward Island, Nova Scotia, Newfoundland and Labrador.

While British Columbia, Quebec, Manitoba, and Saskatchewan continue to have separate GST and HST rates, Alberta, Nunavut, the Northwest Territories, and the Yukon do not have a provincial sales tax.

Understanding Harmonized Sale Tax

At the point of sale, customers pay the HST (POS). The HST rate is added to the price of products and services by the seller to collect the tax.

After that, the seller transfers the money collected to the Canada Revenue Agency (CRA), which is the federal government’s tax agency. The provincial portion of the HST is later distributed by the CRA to the appropriate provincial government.

Before the implementation of the HST in 1997, Canada had two different types of sales taxes: the provincial sales tax and the federal sales tax, otherwise known as GST.

There were substantial variations in the sales taxes across Canada as a result of each province having its rates.

By combining federal and provincial sales taxes into a single, uniform levy across the nation, the HST was designed to simplify the recording and collection of these levies.

Since it makes businesses’ bookkeeping for sales taxes simpler, proponents claim it should lower costs for businesses.

Unfortunately, the HST frequently makes business operations more difficult.

Although the HST was intended to replace the existing federal sales tax, the Canadian government made implementation optional. As a result, many provinces chose to continue using their own distinct systems and rates.

Businesses across provincial borders or nationally—in physical locations or through e-commerce—must deal with this issue because of the discrepancy in tax rates regardless of whether the client is based in an HST province or a GST/PST region. (The PST can be anywhere between 6% and 9.975%, although the GST is 5% everywhere.).

How to Register for HST in Canada

The HST must be collected and remitted by Canadian business owners operating in one of the five provinces. If the company generates annual total revenue of $30,000 or more, the owner must open a GST/HST account with the CRA in order to begin collecting sales tax.

When a province joined the HST program, it set its own PST collecting % and synchronized it with the GST.

So, the actual HST a company, must pay may differ depending on which of the five provinces it does business in. Initially, the percentage was between 13% and 15%, but now it is 15% practically everywhere.

Small suppliers, or owners of companies making less than $30,000 in yearly revenue, are exempt from having to collect or charge the HST.

They can still willingly register to collect the tax, though, as doing so entitles them to input tax credits for the items and services they buy to run their businesses.

Harmonized Sale Tax Calculator

This is a very basic HST calculator that may be used in any Canadian province that uses the Harmonized Sales Tax. Both this calculator and the reverse HST calculator can be utilized.

Choose the province for which you need to compute HST, and then input any figure you are familiar with, such as the HST value, a price that includes HST, or a price that excludes HST. All other values will be calculated immediately.

Definition of Harmonized Sales Tax

Associated person

This is a scenario where one person has control over another for HST purposes. Associated people, sometimes known as “associates,” may include:

• Two or more businesses
• A person and an organization
• A single individual and a partnership or trust
• Two individuals, if they are linked to the same third individual

Capital asset

According to the Income Tax Act, it is typically defined as property that is, or would be, a capital asset. This definition also covers property that, prior to January 1, 2017, was, or would have been, a capital asset qualified for tax purposes.

Eligible capital property

Generally speaking, this is the intangible property that provides you with long-term financial benefits. Examples include goodwill, as well as franchises, concessions, and perpetual licenses.

Participating province

This is a province that has implemented the harmonized sales tax by harmonizing its provincial sales tax with the GST.

With the exception of how much business is done there that qualifies as offshore, as specified in section 123(1) of the Excise Tax Act, the offshore regions of Nova Scotia and Newfoundland are not listed among the participating provinces.

In addition to these provinces, Newfoundland and Labrador, Prince Edward Island, New Brunswick, Nova Scotia, and Ontario are participating provinces.

Place of business

This is any location used to conduct business, whether it is used only for that purpose. Regardless of whether they are rented, owned, or in some situations, merely made available to the firm, installations may be regarded as a place of business.

A supply is said to be zero-rated if it is free of all taxes. In other words, there is no GST/HST charged on these supplies.

However, GST/HST registrants may be qualified to collect input tax credits (ITCs) for the GST/HST paid or payable on goods and services they bought or introduced into a participating province for use and delivery as part of their company operations.

Allowance is any additional payment that a partner in a partnership receives from the partnership, whether it is on a regular basis or not, without having to give a reason for its usage.

For tax reasons, a reasonable allowance is not counted as income for the partnership member.

For instance, when a motor vehicle allowance is based only on an acceptable per-kilometer fee, it is typically not counted as income for the partnership member.

Auxiliary supply

For the purposes of the public service bodies’ rebate, an ancillary supply is defined as an exempt supply of goods or services for which the supplier receives payment or payment is due (other than a nominal amount) for the purpose of paying for medical care.

An ancillary supply must also fulfill one of the following requirements in order to qualify:

The fee is for organizing or coordinating the production of facility supplies or home healthcare items.

The supply cannot be a home medical supply or a facility supply in and of itself; rather, the payment is for the portion of property or service (other than a financial service) utilized to make a facility supply.

Services that could be categorized as ancillary services include centralized laundry, lab, and diagnostic work, and in-patient eating.

Arm’s length

Typically, when the term “arm’s length” is used to describe a connection or a transaction, it means that the people involved are acting independently of one another. 

An arm’s length transaction is one that represents regular economic dealings between parties acting in their own interests.

Dealing with “related persons” is not seen as being at arm’s length. Individuals who are related to one another by marriage, blood, relationship, formal adoption, or actual adoption, a common-law partnership are also included.

A corporation may have a relationship with another person or even with another corporation. A member of a partnership is also considered the partnership’s relative for GST/HST purposes.

Steps To Calculate Sales Tax

1. Find out if you’ll even have to pay sales tax.

First off, regardless of where you buy—in New Hampshire, Delaware, Oregon, Alaska, Montana, or —your final cost will be determined by the sticker price. No sales tax is required.

Another approach to completely avoid paying sales tax is to shop during a tax holiday, which many governments frequently declare in an effort to increase consumer spending.

Additionally, some provinces provide for the exemption of certain items from paying sales tax.

To help you prepare, the CRA maintains an up-to-date calendar that shows which provinces are granting tax holidays (and exclusions) and when.

2. Determine the amount of the sales tax in your province

It can be challenging to estimate exactly how much you’ll pay for sales taxes because they might vary by province and by item, but it’s not at all difficult to get an idea.

The array of sales taxes in each Canadian province is monitored by the Sales Tax Institute.

You could spend hours online figuring out if you have to pay 5% in sales tax, but you might prefer to choose the higher tax rate. When the price is less than expected, nobody ever feels let down.

It can be particularly challenging for national retailers to figure out sales tax when they operate in multiple provinces.

For instance, Amazon makes it explicit what factors are utilized to determine sales tax: Your order will be charged the “combined province and local rates of that address” if it is being delivered or fulfilled from a specific location.

Following that assumption comes a long list of exclusions and restrictions, including whether the order is being delivered to a residential or commercial address.

You can wait until your predicted tax is supplied to you rather than attempting to calculate it on your own because Amazon does provide an estimated tax amount right before you complete the checkout process.

3. Total the retail cost and the tax percentage.

Setting the rates is significantly more difficult than performing the exact calculations required to estimate the amount of sales tax you will be required to pay.

Think about making a $100 purchase with a 15% sales tax.

You would perform the following calculations: Sales tax is calculated as follows: [item cost] x [decimal percentage].

$15 ($100 x .15).

What Affects Your HST Sales Tax Payment In Canada

You estimated the sales tax to be $15; therefore, your total charge will be $115.

The Canada Revenue Agency may adjust your GST/HST credit payment in the following circumstances:

• Your marital status has changed.
• Your eligible child turns 19 years old, and a reassessment of your spouse’s or common-law partner’s tax return causes a change to your family’s net income.
• You no longer have as many eligible children in your care.
• The receiver dies
• You start or stop splitting custody of a child.

A quick method of calculating HST

For small firms, the Quick Method simplifies the calculation of HST.

The Quick Method allows for the calculation of HST payable based on a proportion of sales as opposed to adding up all Input Tax Credits (ITCs) on all expenses and deducting them from HST collected on sales.

How the Quick Method works

If you’re thinking about using the Quick Method, keep in mind that other than how you complete your HST remittance, nothing little will change for you as a business owner.

You continue to pay HST on your expenses, charge HST at the same rate, and keep track of HST on all transactions.

The Quick Method involves taking your sales, adding the HST that has been collected, and multiplying that total by a percentage that is specific to your industry.

You would use 4.4% of sales in Ontario if you were a retailer of goods (such as a convenience shop or petrol station).

You would use 8.8% if you offered a service. If you sell to other provinces, the rates are slightly different. Your net HST will be calculated after deducting up to $300 in ITCs from your eligible purchases and the full HST from any capital asset acquisitions.

HST Sales Tax In Canadian Provinces

As it was said earlier, not all provinces in Canada levy HST sale tax. The HST sale tax is levied in the following provinces.

HST In Nova Scotia

One of the Canadian provinces, Nova Scotia, levies a 15% Harmonized Sales Tax (HST). Despite some categories being exempt or receiving rebates, the HST is generally applied to most goods and services.

In Nova Scotia, the HST went into effect on July 1, 2010. The HST is made up of two components: a 10% provincial sales tax and a 5% federal sales tax.

Rebates and exemptions from the federal portion of the HST for Nova Scotia

Direct exemptions and zero-rated goods and services are the two different categories of HST exemptions. Although there is a difference in how businesses manage costs associated with the exclusions, as a consumer, neither category would require you to pay HST.

These goods and services are excluded from the HST:

• Prescription medications, but no over-the-counter medications (OTC).
• Items for feminine hygiene
• Medical equipment
• Groceries of a basic kind, such as fish, meats, cereals, eggs, vegetables, tea, and so on. HST is applied to a number of items, including snack foods and carbonated beverages.

The following items and services are directly exempt from HST:

• Rentals for a period of time greater than a month
• Medical and dental services
• Daycare services
• Reselling already owned and inhabited homes on the residential side
• Financial services, including bank fees
• Educational services that lead to a degree or certification or are required for a certain practice.
• Legal aid services

HST In Ontario

One of the provinces in Canada levies a 13% Harmonized Sales Tax (HST) in Ontario. Despite some categories being exempt or receiving rebates, the HST is generally applied to most goods and services.

Ontario introduced the HST on July 1, 2010. A provincial sales tax of 8% and a federal sales tax of 5% combine to form the HST. These took the place of the 8% Retail Sales Tax (RST) and the 5% Federal Goods and Services Tax.

Ontario HST rebates and exemptions

The majority of the federal 5% HST exemptions and rebates also apply to the provincial 8% share. Numerous services and goods are also free from the provincial HST.

There are differences between these discounts and exclusions and those offered at the federal level.

These groups consist of the following:

• Books, including audiobooks
• Diapers
• Children’s clothing, footwear, and car seats and booster seats
• Print newspapers

HST In New Brunswick

One of the Canadian provinces, New Brunswick, levies a 15% Harmonized Sales Tax (HST). Despite some categories being exempt or receiving rebates, the HST is generally applied to most goods and services.

New Brunswick adopted the HST on July 1, 2010. A 10% provincial sales tax and a 5% federal sales tax combine to form the HST.

Rebates and exemptions from the federal portion of the HST for New Brunswick

 Direct exemptions and zero-rated goods and services are the two different categories of HST exemptions.

Although there is a difference in how businesses manage costs associated with the exclusions, as a consumer, neither category would require you to pay HST.

These goods and services are excluded from the HST::

• Prescription medications, but no over-the-counter medications (OTC).
• Items for feminine hygiene
• Medical equipment
• Groceries of a basic kind, such as fish, meats, cereals, eggs, vegetables, tea, and so on. HST is applied to a number of items, including snack foods and carbonated beverages.

The following items and services are directly exempt from HST:

• Rentals for a period of time greater than a month
• Medical and dental services
• Daycare services
• Reselling already owned and inhabited homes on the residential side
• Financial services, including bank fees
• Educational services that lead to a degree or certification or are required for a certain practice.
• Legal aid services

HST In Prince Edward Island           

One of the provinces in Canada, Prince Edward Island, levies a 15% Harmonized Sales Tax (HST). Despite some categories being exempt or receiving rebates, the HST is generally applied to most goods and services.

The HST was put into effect in Prince Edward Island on April 1. The two components of the HST are the 5% federal sales tax and the 10% provincial sales tax. In 2016, it went up to 15% from 14%.

Prince Edward Island HST exemptions and rebates

The majority of the 5% federal HST exemptions and rebates also apply to the 10% provincial amount. Numerous products and services are also free from the provincial HST. They differ from those offered at the federal level in terms of rebates and exclusions.

These groups consist of the following:

• Books, including audiobooks
• Diapers
• Children’s clothing, footwear, and car seats and booster seats

Rebates and exemptions from the federal portion of the HST for Prince Edward Island

 Direct exemptions and zero-rated goods and services are the two different categories of HST exemptions.

Although there is a difference in how businesses manage costs associated with the exclusions, as a consumer, neither category would require you to pay HST.

These goods and services are excluded from the HST:

• Prescription medications, but no over-the-counter medications (OTC).
• Items for feminine hygiene
• Medical equipment
• Groceries of a basic kind, such as fish, meats, cereals, eggs, vegetables, tea, and so on. HST is applied to a number of items, including snack foods and carbonated beverages.

The following items and services are directly exempt from HST:

• Rentals for a period of time greater than a month
• Medical and dental services
• Daycare services
• Reselling already owned and inhabited homes on the residential side
• Financial services, including bank fees
• Educational services that lead to a degree or certification or are required for a certain practice.
• Legal aid services

HST In Newfoundland And Labrador

Newfoundland and Labrador is another province in Canada that levies a 15% Harmonized Sales Tax (HST). The HST is applied to the majority of products and services, but some are excluded or qualified for a rebate.

On July 1, 1997, the HST was introduced in Newfoundland and Labrador. A 10% provincial sales tax and a 5% federal sales tax combine to form the HST. In 2016, it went from 13% to 15%.

Newfoundland and Labrador HST Exemption and rebates

The majority of the 5% federal HST exemptions and rebates also apply to the 10% provincial amount. Additionally, many types of goods and services are exempt from the provincial HST.

Numerous products and services are also free from the provincial HST. When compared to those offered at the federal level, these rebates and exclusions differ.

The only exemption and rebate of HST Newfoundland and Labrador is books.

Rebates and exemptions from the federal portion of the HST for Newfoundland and Labrador

 Direct exemptions and zero-rated goods and services are the two different categories of HST exemptions.

Although there is a difference in how businesses manage costs associated with the exclusions, as a consumer, neither category would require you to pay HST.

These goods and services are excluded from the HST:

• Prescription medications, but no over-the-counter medications (OTC).
• Items for feminine hygiene
• Medical equipment
• Groceries of a basic kind, such as fish, meats, cereals, eggs, vegetables, tea, and so on. HST is applied to a number of items, including snack foods and carbonated beverages.

The following items and services are directly exempt from HST:

• Rentals for a period of time greater than a month
• Medical and dental services
• Daycare services
• Reselling already owned and inhabited homes on the residential side
• Financial services, including bank fees
• Educational services that lead to a degree or certification are required for a certain practice.
• Legal aid services

HST Exceptions In Canada

For this tax judgment, there are currently four exceptions. As follows:

• Small Suppliers’ Exceptions
• Exceptions to the Zero-Rated and Exempt Goods and Services
• Selling to a Different Province or Territories
• Providing Services and Selling Goods Outside of Canada

Small Suppliers’ Exceptions

You won’t need to pay taxes in some provinces if your company is considered a small supplier. But be sure to confirm that the exemptions are offered in your province.

Your previous financial year’s total taxable business revenue (before expenses) must have been $30,000 or less for you to be considered a small supplier.

In that case, you are exempt from registering to collect and pay GST or HST. You might want to do so so that you can use your input tax credits to recoup the GST or HST you paid on expenses.

Exceptions to the Zero-Rated and Exempt Goods and Services

There are some goods and services that are exempt or zero-rated. This indicates that they don’t include HST in the client’s price. See what products and services are free from taxation or are not subject to a charge by visiting this government website.

Selling to a Different Province or Territories

You must add GST or HST to any sales of goods and services to provinces or territories that are not yours. However, this fee will be determined by the exchange rate in the destination country, not your own.

Consider a scenario in which you sell to Ontario while residing in Labrador, where the rate is 15%. In this scenario, you will apply Ontario’s HST rate of 13% rather than Labrador’s 15%.

Providing Services and Selling Goods Outside of Canada

Nothing shipped from Canada to another nation requires you to charge GST or HST. However, if you are selling goods like cigarettes and alcohol, you could need to pay export or excise taxes.

These products are subject to excise taxes from the federal government and your provincial government.   

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