If you own a Shopify store based in Canada, you need to understand when to charge Federal and Provincial taxes. This article will help you configure taxes in your store with respect to Canada’s taxation changes in October 2016.
Many businesses in Canada start without a GST/HST number and are classified as a small supplieruntil they surpass a minimum threshold of CAD $30,000 within a calendar quarter.
My business is not GST/HST registered
If your quarterly revenue is equal to or under $30,000 you are not required to register for GST/HST. You are classified as a small supplier and do not charge GST/HST to your customers.
My business is GST/HST registered
When your quarterly revenue surpasses the $30,000 minimum threshold, you are required to register for GST/HST within 29 days. You also need to charge GST on the supply that made you exceed that threshold and henceforth.
In order for your invoices and receipts to be valid, they have to include your GST/HST number, also known as yourbusiness identification number.
Do I charge GST, PST, or HST?
As a registered business in Canada, you will either charge the Goods and Services Tax (GST)and Provincial Sales Tax (PST), or the Harmonised Sales Tax (HST), depending on where the supply is made.
Provinces that charge GST + PST are called non-participating, whilst provinces that use HST are participating.
- Participating (HST) provinces: New Brunswick, Newfoundland & Labrador, Nova Scotia, Ontario, Prince Edward Island.
- Non-participating (GST + PST) provinces: British Columbia, Manitoba, Northwest Territories, Quebec, Saskatchewan, Yukon.
The only exception is Quebec, where the Provincial Sales Tax (PST) is named Quebec Sales Tax (QST). Hence, GST + QST is charged.
|British Columbia||GST 5% + PST 7%|
|Manitoba||GST 5% + PST 7%|
|New Brunswick||HST 15%|
|Newfoundland & Labrador||HST 15%|
|Northwest Territories||GST 5%|
|Nova Scotia||HST 15%|
|Prince Edward Island||HST 15%|
|Quebec||GST 5% + QST 9.975%|
|Saskatchewan||GST 5% + PST 6%|
The tax charged is dependent on where the order is placed from (the billing address of the customer), not where your business is based.
Selling to consumers and businesses
When you are selling goods or services within Canada, you must charge taxes to both consumers (individuals) and businesses.
Certain customers, such as governments, diplomats or indigenous people may be eligible for tax exemption. This means they may be able to claim rebate after the transaction has been made.
If you are selling goods internationally, you do not charge any GST/HST tax, provided that the delivery is outside of Canada. However, you still have to report the sales tax as 0% for taxation purposes.
Sufio will ensure that your invoices remain legal and compliant, and serve as a documentation that the order was shipped outside of Canada.
Zero-rated and tax-exempt goods
Certain goods are classified as zero-rated, which means you do not charge GST on them. However, you still have to display 0% tax on invoices for taxation purposes.
Furthermore, there are goods that are tax-exempt, which means that neither GST, PST or HST applies to them. See this page for examples of zero-rated and tax-exempt goods in Canada.
Selling digital goods
Digital goods are intangible products that exist only in digital form such as e-books, music, or online courses.
If you’re selling digital goods, the same tax rules apply. GST/HST is charged depending on the billing address of the customer. If the customer is located outside of Canada, no tax is charged, however, the invoice must display GST as 0% for taxation purposes.