Does my business have to collect sales taxes?
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Part of the job of entrepreneurs is to collect sales taxes on behalf of the government.
Most businesses in Canada have to collect the goods and services tax (GST) or the harmonized sales tax (HST).
The HST is applied in provinces that have harmonized their sales tax with the federal government’s GST. These provinces are New Brunswick, Nova Scotia, Newfoundland and Labrador, Ontario and Prince Edward Island.
GST is imposed on the sale of taxable goods and services, with the addition of a provincial sales tax or a retail tax. (There is no provincial sales tax in Alberta or in the three territories.)
Do I have to register for the GST/HST?
If you provide taxable goods and services in Canada and your total taxable revenues exceed $30,000 in any single calendar quarter or in four consecutive calendar quarters, you will have to register for the GST/HST.
Your total taxable revenues are your worldwide revenues from your supplies of goods and services and your zero-rated supplies (non-taxable goods and services). However, they do not include goodwill, financial services and sales of capital property. You also have to include the total taxable revenues of all your associates in this calculation.
If your business is located in Quebec, you will have to register for the GST with Revenue Québec.
Do I have to collect provincial sales taxes?
Businesses operating in provinces with HST only have to register with the federal government.
However, if you sell taxable goods and/or services in British Colombia, Saskatchewan, Manitoba or Quebec, you may be required to register with the provincial government to collect the provincial sales tax—called the Quebec Sales Tax in Quebec and the Retail Sales Tax in Manitoba.
Tax exemptions for small vendors vary from province to province. In Manitoba and British Colombia, for example, small vendors with total taxable revenues exceeding $10,000 are required to collect provincial taxes. There are no exemptions for small suppliers in Saskatchewan.
The provincial tax is calculated on the original price without applying the GST.
How do I charge out-of-province and foreign customers?
If your business sells a taxable good or service to an out-of-province customer, then the sales tax that applies in your customer’s province or territory will be applicable. However, the exact details will depend on the level of interprovincial trade and the regulations of the province.
For international customers, you are not required to collect sales taxes, as long as they take delivery of the good or services outside of Canada. If your international customers make purchases while in Canada, they will have to pay sales taxes but may be eligible to receive a refund.
What is an input tax credit?
Once you are registered for the GST/HST, you can recover the GST/HST you have paid or owe for goods and services you acquired, imported or brought into a province in the course of your commercial activities. To ensure your claim is accepted, you must have supporting documentation in case your claim is ever challenged.
If you claim more input tax credit than the taxes you collected in a reporting period, the excess amount will be refunded to you.
Regulations concerning the provincial portion of the input tax credit will vary from province to province, even in provinces that have harmonized their sales tax with the federal government’s.
Visit the Canada Revenue Agency’s site for more information.