GST, PST and HST in Canada

Taxes are an innate part of life that evades the conscious mind in most cases. What are they? What do they stand for, and how much does it cost me? These are questions that should cross every mind of those living or visiting Canada.

Goods and Services Tax, or GST, is a tax on all goods and services in Canada. It is currently set at 5%. It is a flow-through tax that goes from the consumer to the merchant to the government. If the merchant takes in LESS than $30,000 per year, they need not collect this tax; however, if they earn exactly $30,000 or more, they would owe GST to the government on the entire sum. Most businesses collect GST. There are a few graces given for families or necessities purchased in a larger quantity. For instance, donuts are taxable, unless you order a dozen or more – then it’s non-taxable. It sounds strange, but it’s true.

Provincial Sales Tax, or PST, is a tax that is set by some provinces (not all). For example, in British Columbia (BC) it was set at 7.5% while the neighboring province of Alberta had 0% PST. This is a tax on all “luxury” items. Luxury items are those that you don’t need to survive. Rent is not taxable, but cars are taxable. There is a grey area when it comes to items in the grocery store, but rest assured – every item has been examined to ensure it is taxed appropriately.

Collecting both GST and PST can be onerous at times. Merchants aren’t always sure whether they should be collecting or not? And if they do, how do they separate the two? These quandaries gave rise to what has been termed as the Harmonized Sales Tax, or HST. This is a combination of PST and GST. BC, for instance, has moved from collecting both PST (7.5%) and GST (5%) to collecting only HST (12.5%). This is problematic for the consumer when they realize that their donuts are now fully taxable no matter how many they purchase.

It is important to be aware of the taxes in the province in which you reside or visit. These taxes take money from your pockets to provide millions of dollars to the various governments to ultimately provide you with services such as healthcare.  

I am a tax professional, and this article is representative of the prevailing regulations in Canada at the time this article was published.  While I am a professional, you are not my client, and so this should not be considered professional advice. Remember, though, that these rules can vary widely by jurisdiction, and that from year to year tax rules can change.  Therefore, you should always research whether or not you are eligible for these or other deductions/credits.  When in doubt, consult a local tax professional.

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