Understanding GST/HST and retail taxes

retail-taxes-in-canada

One of the strangest things I found after arriving in Canada was the unusual tax system. In my home country, we don’t pay taxes the same way we do here. In Canada, there are two types of taxes that we “regular people” have to worry about: one is sales tax (or what I call “retail tax”), the other is income tax. I might talk about income taxes in the future, but for now, let’s focus on retail taxes.

Here in Canada, when you go shopping, the prices you see on the tags and shelves are the prices before taxes. It’s super important that you get used to this as soon as possible to avoid any budget pitfalls. The price on that tag is not the final price you’ll pay!

For example: say you go to the supermarket and pick up a cereal box marked $4.50. At checkout, not only will it cost more, but how much more depends on what province you live in. Oh, did you really think it was that easy? Hold onto your seat…

Alphabet Soup

Some provinces have GST and PST, others have only HST, and Québec has GST and QST. (Pro tip: Québec is always… shall we say, “different”.)

GST stands for Goods and Services Tax, which is imposed by the federal government.

PST stands for Provincial Sales Tax, which is imposed by provincial governments.

HST stands for Harmonized Sales Tax, and QST stands for—you guessed it—Québec Sales Tax.

A receipt showing the GST and PST taxes

A receipt showing the GST and PST

Basically, when you buy something, you have to pay a part to the federal government (GST) and to the provincial government (PST, or QST if you’re in Québec). As a result, some provinces use HST, which means their provincial and federal taxes are combined, or “harmonized”. This doesn’t necessarily mean you’re paying fewer taxes; it’s just a way to simplify things.

HST receipt

A receipt showing the GST/HST

The provinces that use HST are New Brunswick, Nova Scotia, Newfoundland and Labrador, Ontario, and Prince Edward Island. All other provinces apply GST and PST separately. (The exception here is Québec. Well, technically QST is a provincial tax, but Quebecers like to complicate things, so they call their provincial taxes QST just to be different. From a practical perspective, it’s the same thing.)

QST receipt

And a receipt showing the GST/QST. It’s French, mon amour.

GST/PST/HST Rates

Here’s a table with the different rates of GST, HST, and PST (or QST) for each Canadian province (source):

Province Type PST
(%)
GST
(%)
HST
(%)
Total Tax Rate
(%)
Notes:
Alberta GST 5 5
British Columbia GST + PST 7 5 12 As of April 1, 2013, the HST rate no longer applies in British Columbia.
Manitoba GST + PST 8 5 13
New Brunswick HST 13 13
Newfoundland and Labrador HST 13 13
Northwest Territories GST 5 5
Nova Scotia HST 15 15  WARNING: Highest total rate!
Nunavut GST 5 5
Ontario HST 13 13
Prince Edward Island HST 14 14
Quebec GST + *QST *9.975 5 14.975
Saskatchewan GST + PST 5 5 10
Yukon GST 5 5

The good news is that you can see exactly how much you’re paying in taxes and, in some provinces, who’s receiving your hard-earned money: both federal taxes and provincial taxes are clearly stated on your receipt.

So what is this good for? That’s a good question. One could argue that it helps educate people about the tax system. In some countries, you don’t have the slightest idea how much you’re paying in taxes because they’re hidden in retail prices.

The bad news: there’s no way to save on retail taxes except by moving to another province. Sorry to disappoint you, guys! Some stores will say taxes are “on them” on special occasions like Black Friday, but that’s not exactly true. You’ll get a discount equal to the provincial tax rate, but taxes will be applied to the discounted price. In this case, it pays to live in Nova Scotia or Québec: 15% off is usually a good deal.

That’s pretty much all you need to know about retail taxes in Canada. We could dive into a lot of more specific and detailed (read: complicated) questions about tax laws—how taxes are divided between provinces and the federal government, how these taxes are applied to goods and services, etc.—but let’s just call it a day and leave all that for a future discussion, shall we?

Anything else you’d like to know about retail taxes in Canada? Ask me in the comments!

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Photo by Flickr user Image Editor.

8 Comments

  1. Great article Dan! I’ve been meaning to write a similar article myself that goes into detail about how receipts work and what the various codes mean.

    Reply
    • Wow, that would be something amazing to see! Don’t give up on this idea. Unknown numbers and codes always bother me! :D
      Thanks for stopping by and commenting! Nice to see you around!

      Reply
    • Hey, Stephen! We could totally make use of such an article ;)

      Reply
  2. Actually, breakfast cereal is zero-rated. So there should not be any tax levied on your cereal box.

    See http://www.cra-arc.gc.ca/E/pub/gm/4-3/4-3-e.pdf

    “Consumable products considered basic groceries
    5. Examples of food and beverages that are zero-rated as basic groceries under section 1 of Part III of Schedule VI include fresh, frozen, canned and vacuum sealed fruits and vegetables, breakfast cereals, most milk products, fresh meat, poultry and fish, eggs and coffee beans.”

    Reply
    • LOL nice catch! Invalidate all of my arguments :)

      Reply
  3. Hey Dan
    Quick question, do you know if receipts for everyday things like groceries or clothing can be filed into our taxes during the tax season for a higher tax return?

    Reply
  4. Any idea what eco friendly taxes are if a person isn’t purchasing electronics? I was encouraged to try online grocery orders and I’m 8 months pregnant so I gave it a go with Superstore and am seeing this nearly $20 tax on my order. I can’t seem to find anything online.

    Reply

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