As a business owner, you are likely familiar with GST, but what about HST? And is it something you need to worry about? The answer to this question depends on where you are doing business and whether or not you ship products to other provinces.
The most common place you see a reference to HST is on the form you need to file with the Canada Revenue Agency (CRA) reporting your GST for the period. The same form is used to report HST and the official name of the form is the “Goods and Services Tax/Harmonized Sales Tax (GST/HST) Return.” Each line on the return refers to GST or HST.
What is HST?
The HST, or harmonized sales tax, is a tax charged in provinces where the provincial sales tax and the federal sales tax have been combined into one tax with a federal and provincial portion. If you are an HST registrant, you charge this tax on all your taxable sales.
Most goods and services are taxable. Exempt goods and services include most medical services, tutoring, music lessons, and insurance services. Zero-rated supplies include things like basic groceries, agricultural products, and prescription drugs.
A more inclusive list of exempt and zero-rated goods and services is provided in this blog post.
When Do I Collect the Harmonized Sales Tax?
You collect HST if you operate a business in one of the provinces where HST is applicable or if you ship products to your customers in one of those provinces. Canada has what’s called a “Place of Supply” rule when it comes to sales taxes. This means the tax is calculated based on where the goods are going.
The HST follows the same rules as the GST when it comes to knowing when to register to be eligible to collect the tax. You can voluntarily register at any time, but you must register once your gross annual sales go over $30,000.
What’s the Difference Between the Goods and Services Tax and the Harmonized Sales Tax?
The GST and the HST are both sales taxes. As of November 2021, you calculate GST as 5% of the price of the taxable goods you are selling. The HST (also as of November 2021) is 13% in Ontario and 15% in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island.
You collect sales taxes like GST and HST on behalf of the government that administers them. In the case of GST and HST this is the federal government. The CRA handles the related administration for both taxes. When you collect the tax, you are holding it on the government’s behalf. Filing the GST/HST report shows how you calculated the amount you are remitting to the government.
As you can see, sales taxes in Canada aren’t always straightforward. If you have questions regarding the GST or the HST please get in touch.
