Canada has a federal sales tax system that charges a consumption tax or value-added tax. However, the 5% Goods and Services Tax (GST) that applies throughout Canada is just one of several potential taxes businesses may be required to collect and remit.
In some provinces, there's a separate provincial sales tax (PST). In others, the provincial sales tax rate is combined with the GST into a Harmonized Sales Tax (HST), with HST rates between 13% and 15%. It is up to your business to understand and comply with all of these rules.
It's not just Canadian businesses that have these obligations, either.
Non-resident businesses must register after taxable sales to Canadian customers exceed CA$30,000 over 4 calendar quarters, while non-registered digital service providers must comply with a simplified GST/HST registration, reporting, and remittance regime after July 1, 2021.
This guide explains GST, HST, and PST rates, registration requirements for Canadian and non-resident businesses, special rules for digital services, when to charge tax, how to file and remit tax, and how to remain compliant with rules set by the Canada Revenue Agency (CRA).
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What is GST, and how does it work in Canada?
Most places in the world charge a value-added tax, which differs from a retail sales tax. Value-added taxes are collected on the value added at each stage of production and distribution, unlike a retail sales tax that applies only at the final retail sale.
Canada is one of those countries. Canada's value-added tax (VAT) is called the Goods and Services Tax (GST). It's imposed on the federal level and is administered by the Canada Revenue Agency.
The GST rate is 5%, and GST is charged on most goods and services, although some items are exempt or zero-rated.
Suppliers charge GST (output tax) on sales, but claim Input Tax Credits for GST they paid on business expenses. They must remit the difference to CRA. The end consumer cannot claim credits and bears the full burden of the tax.
Here's how this works in practice:
- A lumber supplier sells wood to a manufacturer for $50 and charges $2.50 in GST (5%). The manufacturer pays $52.50.
- The manufacturer turns the wood into a chair and sells it to a retailer for $150. The manufacturer charges $7.50 (5% GST), so the retailer pays $157.50. The manufacturer collected $7.50 GST but had a $2.50 credit, so claims an input tax credit for the $2.50 and remits a $5.00 payment to the CRA. The manufacturer remitted GST on the $100 of value added to the wood.
- The retailer sells the chair to the customer for $250 and charges $12.50 (5% GST). The retailer collects $12.50 GST from the customer but paid $7.50 in GST, so claims an input tax credit and remits $5.00 to the CRA.
- The CRA collects a total of $12.50 in taxes ($2.50 from the lumber supplier, $5.00 from the manufacturer, and $5.00 from the retailer), which is a total of $12.50 or 5% of the retail sale price. The customer does not recoup the VAT.
While GST is Canada's federal value added tax, many provinces in Canada have agreed to let the Canada Revenue Agency also collect the tax they charge customers within their province.
This creates a Harmonized Sales Tax (HST) that the CRA collects. The CRA keeps the federal portion and sends the provincial portion to the correct province.
In provinces without HST, businesses typically remit federal GST and provincial sales taxes separately under provincial rules.
Canada GST/HST rates
The federal GST rate of 5% applies throughout Canada. However, total taxes due on a sale vary depending on the province where the customer lives. If the province uses HST, there's one blended rate. If it doesn't, the provincial rate is separate from GST.
When there are separate provincial taxes charged, including in British Columbia, Manitoba, Quebec, and Saskatchewan, separate registrations may be required. Compliance with GST alone isn't sufficient if you sell to customers in these areas.
The table below shows the different tax rates that apply in provinces throughout Canada.
Zero-rated supplies
Under the Canadian tax system, some items are classified as zero-rated supplies. This means customers are charged tax at 0%, so they pay no taxes. However, the business can still claim input tax credits on business costs, unlike with exempt items that are outside the tax system.
Examples of zero-rated supplies include:
- Agricultural products such as grain, raw wool, and dried tobacco leaves
- Basic groceries such as milk, bread, and vegetables
- Certain medical devices, such as hearing aids and artificial teeth
- Exports (most goods and services for which you charge and collect the GST/HST in Canada are zero-rated when exported)
- Feminine hygiene products
- Most farm livestock
- Most fishery products, such as fish for human consumption
- Prescription drugs and drug-dispensing services
Exempt supplies
Exempt supplies are outside of the GST/HST system. This means no charge is taxed to customers, and companies also can't claim input credits on purchases related to the activities. Common examples include:
- A sale of housing that was last used by an individual as a place of residence
- Some property and services provided by governments, non-profit, municipalities, and public service bodies, including municipal transit services and standard residential services such as water distribution
- Childcare services for children under 14 for less than 24 hours per day
- Educational services like courses supplied by a vocational school leading to a certificate or a diploma, or tutoring services following a school curriculum
- Insurance policies
- Legal aid services (but not legal services, which are taxable)
- Long-term rentals of residential accommodation lasting a month or more
- Most domestic ferry services
- Most health, medical, and dental services performed by licensed physicians or dentists for medical reasons
- Most property and services provided by charities and public institutions
- Most services provided by financial institutions, such as lending money or operating deposit accounts
- Music lessons
- Residential condo fees
The table below shows how these different categories of tax status work.
Registering for GST/HST in Canada
Both Canadian businesses and non-resident businesses generally must register for GST unless they are small suppliers. Companies that are not required to register may still choose to do so in order to reclaim input GST.
Canadian businesses: the CA$30,000 threshold
Canadian businesses are required to register for GST/HST when they are not considered "small suppliers" and when they make taxable sales, leases, or other supplies. Companies that provide only exempt supplies are typically not allowed to register.
The registration threshold in Canada is CA$30,000. If you exceed CA$30,000 over four consecutive calendar quarters on a rolling 12-month basis, or if you exceed CA$30,000 in a single quarter, you must register for GST/HST.
If you meet the CA$30,000 registration threshold, your effective date of registration is no later than the day of the supply that puts you above the small supplier threshold.
Certain businesses also must register even if they are small suppliers, including taxi and rideshare operators (including Uber drivers), as well as many admission-event businesses that enter Canada.
Small suppliers who aren't required to register can choose to register anyway to claim input tax credits. Doing so may make sense for companies that have substantial taxable business expenses. Some small suppliers also register because customers expect GST/HST invoices.
Once registered, even small suppliers must collect and remit GST/HST on all taxable sales.
Non-resident businesses: standard registration
Non-resident businesses must register if they:
- Are carrying on business in Canada: This is typically defined as having a physical presence in Canada, such as maintaining an office or storing inventory in a Canadian warehouse. The CRA determines if you're carrying on business in Canada by looking at where employees or agents operate, where deliveries occur, or whether services are physically performed in Canada.
- Make taxable supplies in Canada and exceed the CA$30,000 registration threshold. Once the non-resident business no longer qualifies as a small supplier, they must register just like a Canadian business.
Non-registered businesses that register under the standard registration system must charge and remit GST/HST on all taxable supplies made in Canada. They can also claim input tax credits on Canadian business expenses.
In some cases, non-resident businesses may be required to post security with the CRA, equal to the amount of the estimated net tax for a defined period.
Want to learn more? You can learn more about Canada sales tax for U.S. sellers here.
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Non-resident digital service providers: the simplified regime
Effective July 1, 2021, the Excise Tax Act was amended to require digital platform operators and those selling digital products or services to Canadian customers to collect GST/HST. This applies to companies selling
- SaaS subscriptions
- Streaming services
- Downloadable software
- Ebooks
- Online courses
- Digital music
- Apps
- Cloud-based storage
Digital sellers are still subject to the CA$30,000 threshold, so they don't have to register until sales exceed this amount.
Sellers can register under a separate modified GST/HST regime, which is a registration process designed to be easier for companies with no Canadian presence. Specifically, companies can register online via a CRA portal and don't need a Canadian address or representative.
If a buyer provides a GST/HST registration number at the time of sale, the supply of digital goods is also treated as a B2B supply. In this case, the non-resident seller doesn't charge GST or HST. The Canadian business self-assesses. This reverse charge scheme is very common.
Unfortunately, companies that register under the simplified regime cannot claim input tax credits on Canadian business expenses. Non-resident digital goods suppliers with significant Canadian input costs may wish to use the standard registration process instead.
How to register for GST/HST in Canada
To register for GST/HST In Canada using the standard registration process:
- Obtain a Business Number through CRA's Business Registration Online if you don't already have one.
- Register for an account to access CRA online or sign in to your account if you already have one.
- Register for a GST/HST account. You will need to provide information on when your taxable activities started, expected annual sales, how often you'd prefer to file, and what your industry is. You'll also need your legal business name and company structure, your mailing address, the date your operations began, the owner's or director's information, and a social insurance number or incorporation details.
- You will then receive a GST/HST account number that must appear on all tax invoices.
You also have the option to register via mail, while digital businesses applying for simplified registration can do so through CRA's dedicated simplified registration portal.
The registration process generally takes four to six weeks. Your company must collect and remit GST/HST starting from your effective registration date (the date when your revenue exceeds the CA$30,000 threshold) even if you don't yet have a registration certificate.
When to charge GST/HST
Once you have registered, you must ensure you comply with all GST/HST collection requirements. Here are the key details you need to know.
Place-of-supply rules
Canada uses place-of-supply rules to determine what GST, HST, or PST must be charged. This means that it is the customer's location and not yours that matters. You must apply the correct rate for each province where you supply goods.
If you are selling physical goods, the place of supply is the province where you ship or deliver the goods. For example, if you ship to a customer in Alberta, you charge Alberta's 5% GST, while if you ship to a customer in Ontario, you charge Ontario's 13% HST.
If you are selling digital goods, the place of supply is based either on the customer's billing address or other indicators of their province of residence, such as their account information, IP address, or payment information.
B2C sales
Determining the correct process for charging tax on B2C sales is easy. You just charge GST or HST at the rate that applies in the customer's province. This is true whether you are a Canadian business or a non-resident seller who is registered under the standard or simplified regime.
Unfortunately, the most common error foreign suppliers, and especially digital service providers, make is charging just the 5% GST rate regardless of the province. If you do not charge the HST or PST when required and remit to the correct revenue department, this is an under remittance.
B2B sales
Tax compliance on B2B sales can be more complicated, as the rules can differ depending on whether you are registered under the standard GST/HST regime or the simplified regime for digital businesses.
Under the standard regime, the supplier typically charges GST/HST on taxable sales even if the buyer is another business or a reseller. While resellers are generally exempt from U.S. sales tax if they provide an exemption certificate in the U.S., this is not the case in Canada.
Instead of claiming an exemption and not paying GST/HST, a business buying taxable supplies pays the GST/HST due and, when possible, claims an input tax credit to recover the tax paid.
The simplified digital regime works differently. If a buyer provides a GST/HST registration number, the supplier may not have to charge GST or HST. The Canadian business will self-assess the tax on its own return.
It's also important to note that some services supplied cross-border are zero-rated if the recipient is a GST/HST-registered business.
Marketplace facilitator rules
In many countries, including Canada, marketplaces like Amazon and Etsy that facilitate third-party sales are treated as deemed suppliers. This means they are obligated to collect sales or VAT taxes (like GST/HST) on third-party sales on their platform.
Canada refers to marketplaces that facilitate sales as "distribution platform operators" and sites like Airbnb and Uber are included in this definition. Beginning July 1, 2021, these operators are required to charge GST/HST on the final sale price of taxable goods or services.
Sellers who operate on distribution platforms should confirm with the platform whether it is collecting GST/HST on their behalf. If it is, then your company can't also charge these taxes, or the customer would be double-taxed.
Beyond GST/HST: PST and QST
Registering for GST/HST with the Canada Revenue Agency is just one part of your obligations to fulfill tax requirements. Three provinces have their own provincial tax system that runs parallel to the federal GST, while Quebec has its own sales tax separate from the federal GST.
In British Columbia, Manitoba, and Saskatchewan, the federal government collects GST. But you also have to register with the provincial taxing authorities and pay tax within the province. For example:
- In British Columbia, you must register to collect and remit a 7% PST administered by the government of British Columbia if you have a local physical presence, sell digital goods to BC residents, are a marketplace facilitator with vendors selling into BC, or sell taxable goods into BC that generate more than CA$10,000 in revenue over 12 months.
- In Manitoba, you must register to collect and remit a 7% Retail Sales Tax (RST) administered by the Government of Manitoba if you carry on business in Manitoba, are a marketplace facilitator, sell digital goods, or sell taxable goods and services to Manitoba customers that generate more than CA$30,000 in revenue (as of July 1, 2024).
- In Saskatchewan, you must register to collect and remit a 6% Provincial Sales Tax (PST) administered by the Government of Saskatchewan if you carry on business in Saskatchewan, solicit sales, are a marketplace facilitator, sell digital goods, or sell into Saskatchewan as a remote seller. Unlike other provinces, registration requirements kick in at the first dollar of sales.
Quebec administers its own Quebec Sales Tax (QST) that's separate from the federal system. Unlike other provinces, Revenu Québec administers GST for Quebec businesses rather than the CRA collecting the tax.
The registration threshold for both resident and non-resident businesses is CA$30,000.
Staying compliant with Canada's GST/HST
Registered businesses in Canada are required to issue GST/HST-compliant invoices for taxable sales. However, the specific invoice requirements vary depending on the amount of the invoice:
- For sales under CA$30, the invoice must contain the name or trade name of the supplier, the invoice date or date payment was payable, the total amount paid or payable, and an indication of GST/HST charged.
- For sales between CA$30 and CA$150, the invoice needs to contain everything required for invoices under CA$30, plus the supplier's GST/HST registration number, the purchaser's name or trading name, and the GST/HST charged, the tax rate, or a statement that the tax is included in the total price.
- For sales of CA$150 or higher, detailed documentation is required, including the supplier's full address, the purchaser's name, a detailed description of the goods and services, payment terms, total amount paid or payable for each supply, the GST/HST amount payable for each supply, and the supplier's GST/HST registration number.
While some locations, like Italy, require mandatory electronic invoicing, this is not required in Canada. However, you still must retain all invoices for audit purposes and must ensure that you comply with the specific invoice requirements based on the value of the sale.
Filing returns and deadlines
Except for charities and Selected Listed Institutions (SLFIs), all GST/HST registrants are required to file returns electronically. Filing paper returns will result in a penalty. You must use the My Business Account portal or a CRA-approved accounting software to upload and submit your filing.
CRA assigns default reporting periods based on revenue amounts, but you are allowed to request to file more frequently.
The chart below shows how often you must file, based on annual taxable revenue.
If your reporting period is monthly or quarterly, your filing and payment deadline is one month after the end of the reporting period.
If you file annually, your filing and payment deadline is typically three months after your fiscal year ends, although sole proprietors have a payment deadline of April 30 and a filing deadline of June 15.
Input Tax Credits (ITCs)
Because Canada's GST/HST system is a VAT system, companies do not bear the burden of tax on business inputs. In Canada, your business can recover GST/HST paid on eligible expenses by claiming input tax credits. This is similar to input VAT recovery in EU systems.
Input tax credits allow your business to reclaim GST that was paid or payable on purchases and expenses used in commercial activity, including the purchase of things like inventory, rent, advertising, software subscriptions, and utilities.
To claim input tax credits, your business must:
- Be registered for GST/HST
- Acquire goods or services for use in commercial activities
- Have paid or owe GST/HST on valid purchases related to taxable business activity
- Have valid documentation, including a valid invoice
You must make a claim to recover input VAT within four years of the end of the reporting period in which the credit first became available.
Businesses registered under the simplified regime cannot claim input tax credits. This, unfortunately, is part of the tradeoff you make when you choose simplified registration.
Record-keeping
You are required to keep certain records to support GST/HST returns and claims. These records must be kept for six years from the end of the year the records relate to. Records you must keep include:
- Sales invoices
- Purchase receipts
- Import documents
- Bank statements
- General ledgers
- All GST/HST returns filed
- All other records related to business operations and the GST/HST
You must keep your records in Canada or make them available to the CRA upon request. If your operations are located outside of Canada, you must ensure they can be produced domestically.
CRA penalties
CRA imposes penalties for late GST/HST registration, late filing, late payments, and errors in returns. These penalties include:
- Late registration: Retroactive charges for all the tax due, plus interest and late filing penalties.
- Late filing: 1% of the amount owed, plus an additional 0.25% of the amount owed for each complete month the return is overdue, up to a maximum of 12 months.
- Late payments: Interest at the CRA's prescribed rate beginning from the day the payment was due. Interest rates change quarterly.
- Errors in returns: Generally, the penalty for reporting information incorrectly is at least 5% and up to a maximum of 10%, made up of 5% of the incorrect amount, plus 1% per month of the difference between what is reported and what should have been reported, until the amounts are corrected
How Numeral handles Canada GST/HST
GST and HST compliance in Canada can be complicated, especially for ecommerce and SaaS businesses that may be selling into different provinces and that must manage different rates, registration requirements, and filings. Evolving laws also compound the compliance challenges.
Fortunately, you don't have to manage this on your own. Numeral can take care of it for you. Numeral automates the challenging aspects of Canada GST/HST compliance and takes all of these tasks off your plate. Numeral can:
- Apply the correct rates: Numeral calculates the GST, HST, and PST in real-time based on every customer's individual province, so you'll always charge tax at the correct rate.
- Monitor registration requirements: We'll track your sales in Canada across all sales channels and alert you when you cross the CA$30,000 threshold and are required to register.
- Register you for GST/HST/PST: Numeral auto registers for you with CRA and in any province where you have met the threshold, so you can avoid the penalties that come with late registration.
- File and remit: Numeral will prepare and file your GST, HST, or PST returns under the standard or simplified regime. We'll file with CRA and in every required province and remit payment on schedule and every return will be reviewed by a Numeral tax professional before submission.
We also back every service with the Numeral Guarantee. If a filing error on our part results in penalties or interest charges, we'll cover the cost.
Get started or book a demo with Numeral to learn more about how we can help you with Canada GST/HST compliance.
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Canada GST/HST FAQs
Still need to know more? Here are the answers to some frequently asked questions about GST and HST in Canada.
What is the GST rate in Canada?
In Canada, the federal GST rate is 5% and applies to most sales of goods and services. Some provinces have combined their taxes with the federal tax, so customers are charged a Harmonized Sales Tax (HST) with rates ranging from 13% to 15%. Other provinces charge a separate local tax.
The customer's province determines what rate must be charged. There are also zero-rated and exempt items where customers pay no taxes.
Do I need to register for Canadian GST/HST if my business is outside Canada?
Non-resident businesses, including those selling digital goods, must register to collect GST/HST in Canada once sales to local residents exceed CA$30,000. Sellers of digital goods can register under a simplified regime.
What's the difference between GST, HST, PST, and QST?
GST is the 5% federal sales tax charged in Canada.
Some provinces have combined with CRA to charge one tax, including the federal and local taxes, which is distributed to provinces. These combined taxes are called Harmonized Sales Tax (HST).
Other provinces have their own provincial sales tax (PST), while Quebec has its own separate system called Quebec Sales Tax, with Quebec's revenue authority collecting both GST and QST for Quebec businesses. Provinces charging their own taxes require a separate registration.
How often do I need to file a Canadian GST/HST return?
Your required filing frequency for GST/HST returns varies depending on taxable revenue. Specifically:
- You must file monthly with revenue totaling CA$6 million or higher
- You must file quarterly with revenue between CA$1.5 million and CA$6 million
- You must file annually with revenue under CA$1.5 million
Electronic filing is mandatory for reporting periods after January 1, 2024.
Monthly and quarterly filers must submit returns a month after the end of the reporting period, while annual filers must file three months after their fiscal year ends, except for sole proprietors who have a payment deadline of April 30 and a filing deadline of June 15.
What are Input Tax Credits, and can I claim them?
Input tax credits allow GST/HST-registered businesses to recover the GST or HST paid on eligible business expenses that were used to make taxable supplies. You can claim them if you are registered and have eligible expenses, but not if you are registered under the simplified digital services regime.
What happens if I don't register for GST/HST when required?
If you do not register for GST/HST when required, you will owe back taxes dating back to the time you should have registered. You will also owe a late filing penalty as well as interest. Liability accumulates quickly, and you typically cannot go back and charge customers for past sales, so your company will be liable for covering the back taxes due.
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