How to Calculate HST for Small Business (Canada)

Question: How do you calculate GST/ HST?

Answer:

How to calculate HST for small businesses in Canada depends on which province or territory your place of business resides. Some provinces have harmonized their provincial taxes with the Goods and Services Tax GST and charge a Harmonized Sales Tax (HST) on taxable goods and services. Some provinces/territories have no provincial sales tax and charge HST only, and some provinces charge a separate Provincial Sales Tax (PST). 

So when you are selling goods or services in the province where your small business is domiciled, you charge your customers the appropriate tax and rate that province or territory calls for. There are, as you'll see below, several exceptions to the general rule. First, though a look at which provinces and territories charge what.

Provinces That Charge HST

Ontario, Nova Scotia, New Brunswick, Prince Edward Island and Newfoundland/Labrador charge HST. In those provinces, you would charge the appropriate percentage of HST on goods and services. Combined with GST, in those provinces the rates are:

• In Ontario, 13%
• In New Brunswick, 15%
• In Prince Edward Island, 15%
• In Nova Scotia, 15%
• In Newfoundland & Labrador, 15%

So let's suppose you run a gift store and you sell a wind chime at a price of $39.99 (a taxable good). If you were selling it in Nova Scotia, its price would be calculated as:

1 Wind chime   $39.99
HST @ 15%      $6.00

Total Price      $45.99

Whereas in Ontario, the price would be:

1 Wind chime   $39.99
HST @ 13%      $5.20

Total Price      $45.19

Provinces With No PST (Provincial Sales Tax)

Calculating GST and invoicing is a snap in Alberta, the Northwest Territories, Nunavut and Yukon as these provinces and territories have no provincial sales taxes; GST is charged by calculating 5% of the item's sale price and adding it onto the bill. An invoice for the wind chime if you sold it in any of these places would simply be:

1 Wind chime   $39.99
GST @ 5%      $2.00

Total Price      $41.99

Provinces That Charge GST and PST Separately

In provinces where there is PST (Provincial Sales Tax) you have to charge both GST and PST; you calculate the GST on the price of the goods or service before PST has been applied.

The provinces of Manitoba, Saskatchewan and British Columbia have PST:

• In British Columbia, 7%
• In Saskatchewan, 6%
• In Manitoba, 8% (known as the Retail Sales Tax or RST)
• In Quebec - 9.975% (known as the Quebec Sales Tax or QST) .

For example, in Manitoba, the Retail Sales Tax is 8 percent. RST, like GST, is charged on the total selling price of the merchandise. (The total selling price includes delivery, mailing, transportation, or handling charges.) So in this case your sale of the wind chime would be calculated as:

1 Wind chime  $39.99
GST @ 5%      $2.00
PST @ 8%      $3.20

Total Price      $45.19

Exceptions for Small Suppliers

If you qualify as a Small Supplier, in some provinces you won't have to add any taxes at all (but be careful because not all provinces exempt their Small Suppliers from PST).

To qualify as a Small Supplier, your total taxable business revenues (before expenses) must be $30,000 or less in the past year. If this is the case, you do not have to register to collect and remit GST/HST. You may wish to do anyway so you can recover GST/HST on expenses paid through Input Tax Credits. Note that for provinces that charge a separate PST you may qualify for the Small Supplier exception for the federal GST but in the provinces of Saskatchewan and Manitoba you must still charge PST/RST. BC has an equivalent Small Supplier exception for the PST so if you qualify in BC you will not have to charge and remit either tax.

Exceptions for Exempt and Zero-Rated Goods and Services

Some goods and services are exempt or zero-rated, which means that you do not charge HST on the customer invoice. See What Goods and Services Are GST/HST Exempt or Zero-Rated? for an explanation of exempt and zero-rated goods and services and examples of each.

Selling Goods and Services to Another Province or Territory

If you are selling goods and services to another province or territory you charge GST/HST based on the rate charged in the destination province/territory. So for example if your business resides in BC and you are selling and shipping products to Alberta you would charge 5% GST rather than the BC rate of 5% GST + 7% PST.

Selling Goods and Services out of Canada

You do not need to charge GST/HST on goods shipped to another country. There may, however, be export/excise taxes. For example, products such as cigarettes and alcohol are subject to excise taxes from the provincial and federal governments.

For more on invoicing and applying taxes, see How to Invoice and An Invoice Sample with HST. Both of these articles explain exactly what information has to be on an invoice as well as providing invoice templates you can use.

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