If you’re a business importing a variety of goods into Canada—electronics, clothing, maybe even some specialty foods—the following scenario is likely all too familiar. As your shipment arrives, you’re suddenly faced with a slew of taxes. You see GST on some items, HST on others, and in certain provinces, PST comes into play too. It can be confusing to figure out which tax applies to which products and how much you need to pay for each. Without clear knowledge, this could lead to unexpected costs and delays.

Selling products in Canada means dealing with these added taxes on top of prices. These affect your pricing, the customs process when importing goods from abroad, and your business’s overall success. Knowing which taxes apply to your products helps you price them correctly, pass these costs to your customers, and ensure a smooth import process.

 

What is GST?

GST, or Goods and Services Tax, is a federal tax applied to most goods and services sold in Canada. This tax is collected at each stage of the supply chain, from production to the point of sale. The current rate of GST is 5%, so, for example, if a shopper buys a $100 dress, the final price would be $105 with GST included.

 

What Is PST?

In addition to GST, PST, or Provincial Sales Tax, is a tax levied by individual provinces. Each province sets its own PST rate and application requirement. For example, British Columbia charges a 7% PST, while Saskatchewan charges 6%. Note that in Quebec, this tax is referred to as QST and is set at a rate of 9.975%. It’s important to note that PST only applies to goods and services within the specific province that imposes it. So, if you’re selling a $1,000 computer in British Columbia, you would charge an additional $70 in PST and $50 in GST, totaling $1,120.

 

What Is HST?

HST, or Harmonized Sales Tax, combines the federal GST with a provincial sales tax (PST). This tax is designed to simplify the sales tax process by merging both taxes into one. HST is applicable in five provinces: Ontario, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador. The rate varies by province, with Ontario at 13% and the others at 15%. As such, if you hire a contractor in Ontario for a $10,000 home renovation, the total cost would be $11,300, including HST. But if you hire the same type of professional in Labrador, the final tally including HST would be $11,500.

 

What are the Differences Between GST, HST, & PST?

If all the tax acronyms and numbers seem like a lot to take in, here’s a simple comparison chart to make things easier to understand:

Tax Type        Applies Where                         Rate                      Example Application
GST Nationwide 5% Most goods and services
PST Specific to each province 5-9.975% Additional provincial tax
HST Select provinces 13-15% Combined federal and provincial tax

 

GST, HST, & PST Registration

Figuring out what taxes to charge is just the first step. Remitting those taxes is just as important. Here’s a detailed guide to help you through the registration and remittance process for GST, HST, and PST.

 

Step 1: Determine if You Need to Collect Sales Tax

Most businesses operating in Canada are required to collect sales tax. Businesses whose global annual revenue exceeds $30,000 must register for GST/HST. Small providers earning less than $30,000 annually are exempt but can still choose to register to benefit from GST reimbursements on imports.

Certain goods and groups are exempt from sales tax, including essential items like basic groceries, prescription drugs, and some medical devices. Indigenous Peoples, Governments, and Diplomats are also exempt from GST/HST.

 

Step 2: Register for GST/HST and PST

GST/HST Registration

PST Registration

  • Register separately with each province where you conduct business.
  • For example, if you sell products in British Columbia and Saskatchewan, you need to register for PST with both provincial governments.

 

Step 3: Bill Customers Based on Their Location

The sales tax rate depends on the customer’s province, not the business’s location. As such, make sure to apply the appropriate tax rate to your invoices based on each customer’s home province. This means that if your business is in Alberta and your client is in Ontario, the Ontario tax rates must be applied.

Note that you do not need to collect sales tax from international customers if the goods or services are delivered outside Canada.

 

Step 4: Remit the Collected Taxes

After collecting the taxes, you need to pay them to the CRA and applicable provincial governments.

  • GST/HST: File a return with the CRA and remit monthly, quarterly, or annually based on your filing period. Payments over $50,000 must be made online or via a financial entity.
  • PST: File with each provincial government, report, and remit taxes based on your assigned reporting period. 

Important: Ensure you keep detailed records of collected taxes to avoid issues during tax return time.

 

How GST, HST, And PST Impact Shipping?

GST, HST, and PST impact shipping costs, logistics, and compliance, influencing how goods move across borders and within Canada. Businesses shipping goods to provinces like British Columbia, Quebec, and Saskatchewan that don’t levy HST, must account for PST in addition to GST. This dual tax obligation can be complex, requiring detailed record-keeping to ensure customers are charged the right taxes, and precise tax remittance to avoid penalties.

Partnering with a customs broker like ClearIt helps businesses shipping products into Canada and across its provinces manage these tax intricacies, ensuring smooth and compliant shipping operations. So, what are you waiting for?

 

SCHEDULE A MEETING WITH A CLEARIT CUSTOMS BROKER

 

 

FAQs:

What does GST stand for?

  • GST stands for Goods and Services Tax. It is a federal tax applied to most goods and services sold in Canada.

 

What does HST stand for?

  • HST stands for Harmonized Sales Tax, which combines the federal GST with a provincial sales tax (PST). This tax is applicable in five provinces—Ontario, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador—with rates varying by province.

 

What does PST stand for?

  • PST stands for Provincial Sales Tax, a tax levied by individual provinces in addition to GST. Each province sets its own PST rate.

 

Is GST federal or provincial?

  • GST is a federal tax applied to most goods and services sold in Canada. It is separate from provincial taxes like PST, which vary by province, and the Harmonized Sales Tax (HST), which combines GST and PST in certain provinces.