GST, PST, HST: Understanding Sales Taxes in Canada

“How do sales taxes work in Canada?” This is a question that we often get.

To put it simply, there are different types of sales taxes and the levels depend on what you are buying and in which province. We’ll explain everything in this article.

Federal and Provincial Sales Tax

When you buy a product or service, it may be subject to two taxes that are applied to the sticker price:

1. GST (Goods and Services Tax)
2. PST (Provincial Sales Tax)

The GST is set at the federal level and is fixed at 5%. Some products and services are exempt, but in the majority of cases, GST applies.

Unlike the GST, the PST varies from province to province. The provincial government determines the rate of this tax, as well the products and services that are subject to it.

HST: Harmonized Sales Tax

The HST is a single tax that combines the federal and provincial sales taxes. It is only used in the following provinces:

• Prince Edward Island
• New Brunswick
• Nova Scotia
• Ontario
• Newfoundland and Labrador

It is intended to simplify taxation for businesses.

*The provincial sales tax in Quebec is called the QST, Quebec Sales Tax (TVQ in French).

Sales taxes on goods in Canada

Whenever you go shopping in Canada, remember that prices displayed do not include sales taxes, which are applied only at checkout.

Some food products are completely tax-exempt. Taxable and tax-exempt products are determined by each province, but in general, they include basic groceries such as bread, milk and meat, fruits and vegetables, and eggs. The exemption doesn’t apply to things like soft drinks, coffee, personal hygiene products, ice cream, etc.

At restaurants, prices on menus are also displayed without taxes. When you get the bill, you’ll see the applicable taxes. It’s customary in Canada to leave a tip as well, even if the service wasn’t exceptional.

Clothing and furniture are also taxed at the same level as other consumer goods, and prices are displayed before tax. Gasoline is taxed, but prices displayed at the pump include taxes.

Sales taxes on services in Canada

Like goods, services are taxed too in Canada. When you shop around for a phone or Internet plan, prices are pre-tax. However, banking services (such as your annual bank account fee) are not taxed.

Once again, sales taxes on services vary depending on the Canadian province. Public transit passes are taxable, although the price is sometimes displayed with taxes included. The same applies to tourist accommodations, where rates are generally pre-tax.