As a Canadian business owner, understanding and managing sales taxes is a complex but crucial part of your operations. With 2024 on the horizon, staying up to date on the provincial sales tax, goods and services tax, and harmonized sales tax is key to ensuring compliance and optimizing your financial strategy.
This guide breaks down the essentials of each tax type and their application across different provinces, empowering you to navigate the fiscal year with confidence.
In 2024, Canadian business owners must navigate a complex landscape of sales taxes, which includes the provincial sales tax (PST), goods and services tax (GST), and harmonized sales tax (HST). Each tax has its specifics:
Certain provinces, like British Columbia, Manitoba, Quebec, and Saskatchewan, require businesses to collect both PST and GST. The tax rates in these regions are:
In Alberta, the Northwest Territories, Nunavut, and Yukon, businesses are required to charge only the 5% GST.
It's important to note that Alberta also imposes a 4% tax on lodging and hotel room fees — once again highlighting the differences in local tax laws.
In New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island, HST is applicable:
The small supplier rule, exempting businesses with less than $30,000 annual revenue from GST/HST registration, applies to federal sales tax only (GST and HST). Each of the provinces has its own rules regarding provincial sales taxes.
For instance, in Quebec, this rule applies to the Quebec sales tax (QST), but in other provinces, businesses may still need to collect PST regardless of revenue. Quebec is the only province to apply the small supplier rule.
In British Columbia, you can register for a PST account online using eTaxBC. If you prefer the traditional paper application route, you can complete Form FIN 418 (Application for Registration for Provincial Sales Tax) and mail it to the Ministry of Finance.
Once registered, you must collect 7% PST on all applicable sales. You’re required to report monthly, quarterly, or semi-annually based on the amount of PST you collect. You have the option to report and remit taxes through the online service or using Form FIN 400 (Provincial Sales Tax Return).
In Manitoba, PST is referred to as retail sales tax (RST). You need to collect 8% of each sale. To register, complete Form MBT-RL1 (Application for Registration / Dealer’s Licence) and mail it to the Minister of Finance. If you prefer an online option, register for an account online using TAXcess. You can pay your Manitoba RST online or through the mail — whichever is more convenient for you.
If you sell goods or services in Saskatchewan, you need a supplier's licence. Use the online Corporate Registry to register, or complete an application form and send it to the Government of Saskatchewan. Once you register, you’re responsible for charging 5% PST.
If you collect more than $7,200 in PST per year, you need to remit sales tax monthly. If you collect between $3,600 and $7,200, you may remit quarterly, and if you collect less than $3,600, you may remit annually. The provincial government sends you a reminder in case your PST payment slips your mind. You need to send in your payment 20 days after the end of the filing period.
Understanding how your supplies are categorized under the GST/HST regime is essential:
Taxable supplies: These include most goods and services, like new housing, automobiles, legal services, and hotel accommodations. Businesses making over $30,000 annually in taxable supplies must register for GST/HST.
Exempt supplies: Items like used housing, long-term rentals, medical services, and financial services are exempt, meaning you don't charge GST/HST — but you also can't claim input tax credits.
Zero-rated supplies: These are taxable at a 0% rate. This category includes basic groceries, certain medical devices, and exports. Businesses can claim input tax credits on these supplies.
Working with foreign clients introduces different GST/HST implications.
Generally, exported goods and services are zero-rated (taxed at 0%), but exceptions exist, especially for real estate and services related to Canada.
Verifying the residency status of clients is critical to ensure accurate tax charges.
For businesses surpassing the $30,000 threshold, registering for a GST/HST account is mandatory.
It's crucial to determine the taxability of your goods or services and charge the appropriate tax rate. Tools like QuickBooks can assist in accurately calculating GST/HST on transactions.
Your sales volume dictates the frequency of GST remittance:
Timely remittance is crucial to avoid penalties and interest.
There are instances when closing your GST/HST account is necessary, such as business closure or change in taxable supplies. It's important to promptly notify the CRA to avoid unnecessary filings or penalties.
Mastering sales tax compliance is an integral part of running a successful business in Canada. With varying rates and rules across provinces, it's essential to stay informed and organized.
QuickBooks streamlines this process, helping you track income, expenses, and tax obligations efficiently. Embrace peace of mind and compliance this tax season with QuickBooks. Learn more about QuickBooks and its benefits for your business.
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