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…
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.
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.
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.)
Here’s a table with the different rates of GST, HST, and PST (or QST) for each Canadian province (source):
|Total Tax Rate
|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|
|Newfoundland and Labrador||HST||13||13|
|Nova Scotia||HST||15||15||WARNING: Highest total rate!|
|Prince Edward Island||HST||14||14|
|Quebec||GST + *QST||*9.975||5||14.975|
|Saskatchewan||GST + PST||5||5||10|
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.