GST/HST, QST and PST for Online Sellers

Online businesses selling services or products in Canada should understand Canadian taxes like GST. Canadian taxes consist of the federal Goods and Services Tax/Harmonized Sales Tax (GST/HST), Québec Sales Tax (QST), and Provincial Sales Tax (PST). GST is a flat 5% federal sales tax. HST is the provincial tax component, raising the rate to between 13% and 15%, varying by province.

Who Needs to Register for GST/HST?

If you’re a business operating within Canada and your gross sales exceed $30,000, you must register for GST/HST. Historically, non-resident businesses weren’t required to register unless they carried on business in Canada. These businesses may now need to register and collect tax depending on their involvement with Canadian consumers.

On July 1, 2021, the Government of Canada extended the GST/HST registration requirements to target the flourishing digital economy. Non-resident businesses selling over $30,000 to Canadian residents who are not GST/HST-registered must collect and remit GST/HST. Digital platform operators are responsible for registering and remitting tax on behalf of non-residents selling to unregistered Canadian residents.

Non-residents selling tangible personal property from or within Canada to unregistered Canadian residents are required to register and collect GST/HST if the sales exceed $30,000.

Illustration showing coins stacked and loose on a desk in front of a sign with a Canadian maple leaf, all indicating the subject of Canadian taxes like GST

Navigating Provincial Taxes

Each province in Canada has specific sales tax requirements that can create additional layers of complexity for online businesses. They vary in rates, registration thresholds, and application to different goods and services.

Québec Sales Tax (QST)

If your business is not based in Québec and you’re not actively conducting business within the province, you’re usually exempt from registering for the Québec Sales Tax (QST) under the standard rules.

Here’s an important note for non-Québec residents. If your taxable sales to customers within Québec surpass the $30,000 mark and it’s determined that your business activities constitute “carrying on business” in the province, then you’ll need to register to collect the appropriate QST on those sales. Québec Sales Tax (QST) is levied at a rate of 9.975% and operates in a manner similar to GST/HST in other provinces.

British Columbia PST (BC PST)

British Columbia (BC) levies a 7% Provincial Sales Tax (PST) on specified goods and services. Online retailers based in BC with taxable sales, and those outside the province targeting BC customers via advertising and sales, must register for PST collection. Orders from BC residents, regardless of delivery method, require PST collection. Small sellers generating under $10,000 in retail sales and without a physical store in BC are exempt from PST registration.

Manitoba PST (MB PST)

Manitoba imposes a 7% Provincial Sales Tax (PST), where online retailers with a Manitoban operation must register if conducting taxable sales. Out-of-province businesses must also register if they sell and deliver taxable goods for use within Manitoba, actively solicit Manitoban customers, and accept orders originating from the province.

Saskatchewan PST (SK PST)

Saskatchewan applies a 6% PST on taxable sales within the province. Vendors in Saskatchewan must register and collect this tax. Out-of-province online sellers are required to register if they sell goods destined for use in Saskatchewan, deliver to Saskatchewan addresses, market to Saskatchewan residents, and accept orders from the province.

An illustration showing a online secure ecommerce form with a model of  a shopping cart at the base

Selling Online Across Provinces

Let’s understand how selling online between provinces works. GST/HST-registered businesses must charge tax based on the delivery location of their goods. It means that even with a sole physical presence, businesses must consider the tax rate of the customer’s province.

Online Service Providers

Online services have tax rates that are based on the customer’s address, which is different from physical goods. It is crucial for tax compliance to know where your customers reside.

Practical Canadian Tax Tips for Online Sellers

  • Identify Customer Locations: Establish systems to determine customer residence accurately.
  • Understand the Tax Requirements: Familiarize yourself with GST/HST, QST, and PST regulations as they apply to online sales.
  • Be Prepared for Changes: Canadian Tax legislation is dynamic regarding the digital economy. Stay up-to-date with provincial and federal tax changes.
  • Invest in Accounting Software: The right software can help you track sales and calculate the correct tax rates automatically.
  • Seek Professional Advice: Tax professionals can provide valuable guidance tailored to your unique situation.

WordPress Solutions for Canadian Taxes

For WordPress users, there are some great plugins available that can automate the process of calculating the GST/HST, QST or PST, ensuring that you remain compliant with Canadian tax laws.

WooCommerce and Its Canadian Tax Extensions

WooCommerce logo

WooCommerce itself is a foundational plugin for building an e-commerce store on WordPress, and it comes with capabilities for basic tax calculations. You can enter tax rates manually and set up the system to apply those rates based on your customers’ billing or shipping address.

Canadian Tax Plugins for Digital Goods

Easy Digital Downloads (EDD) is perfect for digital stores. It automatically calculates Canadian taxes for digital products and services, adheres to global tax laws, and generates compliant invoices.

Shopify for WordPress

Shopify WordPress Plugin allows you to integrate Shopify’s powerful e-commerce capabilities, including its built-in tax management tools, into your WordPress site. This plugin is beneficial for businesses looking for a comprehensive e-commerce solution with reliable tax calculation features.

Specialized Canadian Tax Invoice Tools

WP-Invoice enables WordPress site owners to create and send invoices with the added functionality of including tax calculations, which can be customized for different products and services to cater to Canadian tax requirements.

By using these WordPress plugins, online businesses can effectively manage the complexities of Canadian taxes. With automated calculations and current Canadian tax rates, you can avoid potential errors. It’s important to stay abreast of tax regulation changes. Always verify that the plugin continues to meet all your business tax calculation needs.

Topics: Business, E-Commerce, WooCommerce, WordPress
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