The Harmonized Sales Tax (HST) is Canada’s combined federal and provincial consumption tax applied at the point of sale. It merges the federal Goods and Services Tax (GST, 5%) with a province’s retail sales tax into a single levy that is administered by the Canada Revenue Agency (CRA). The HST is collected by vendors from purchasers and remitted to the CRA, which then forwards the provincial portion to the province.
Key takeaways
– HST = GST (federal 5%) + a provincial portion; total rates vary by province.
– Five Canadian provinces use HST (see section below).
– Businesses that meet the registration threshold must collect and remit HST; small suppliers under the threshold can choose voluntary registration.
– Some goods and services are zero-rated (taxed at 0%) or exempt.
– The HST is intended to simplify tax administration and reduce business compliance costs, but its impact on prices and tax incidence is debated.
Who pays the HST in Canada?
– Consumers pay HST at the point of sale in HST-participating provinces.
– Vendors collect HST and remit it to the CRA.
– Businesses with total taxable revenues (across Canada) of $30,000 CAD or more in the last four consecutive calendar quarters must register for a GST/HST account and charge HST on taxable supplies in participating provinces. Businesses below $30,000 are “small suppliers” and are not required to register, though they may choose to voluntarily register to recover input tax credits.
Canadian provinces and the HST
As of 2025, five provinces use the HST:
– Ontario
– Nova Scotia
– New Brunswick
– Newfoundland and Labrador
– Prince Edward Island
(Other provinces and territories: Quebec, Saskatchewan, Manitoba and British Columbia use separate provincial sales taxes (PST) alongside the federal GST; Alberta and the three territories do not have a provincial/territorial sales tax and only charge the GST.)
Note: HST rates differ by province because each province’s provincial portion varies. Always check the CRA or the province’s finance ministry for the current total rate for a given province, since provincial rates can change.
Registering and collecting the HST — practical steps for businesses
1. Determine whether you must register
• Add up your revenues from taxable supplies (including those in HST and non-HST provinces). If total revenues in the last four consecutive calendar quarters are $30,000 or more, you must register for a GST/HST account. (Small supplier threshold exceptions exist for charities, public service bodies, and registrants in specific industries.)
2. Register for a GST/HST account
• Register online via CRA My Business Account or the CRA Business Registration Online service, or by phone/mail with the CRA. You will receive a GST/HST number to use on invoices and returns.
3. Charge the correct tax
• Determine the place of supply rules (where the sale is considered made) to decide which rate applies. Charge HST at the rate applicable to the province of supply.
• For sales into provinces that don’t use HST, you may need to charge GST plus the applicable provincial sales tax (PST) or follow that province’s registration rules.
4. Collect and remit
• Collect HST from customers and hold it as a trust obligation.
• File GST/HST returns and remit net tax owing to the CRA at the required filing frequency (monthly/quarterly/annually), as assigned by the CRA.
5. Claim input tax credits (ITCs)
• Businesses registered for GST/HST can claim ITCs to recover GST/HST paid on business purchases and expenses that are used in commercial activities.
6. Keep proper records
• Keep invoices, receipts, contracts and accounting records to support amounts charged and ITC claims (CRA generally requires keeping records for six years).
Exempted, zero-rated and taxable supplies — what to watch for
– Taxable supplies: most goods and services sold in HST provinces are taxable at the applicable HST rate.
– Zero-rated supplies: taxed at 0% (seller charges no HST but can claim ITCs). Typical examples: basic groceries, most exported goods, prescription drugs, many agricultural products, and books — but specific rules and definitions apply.
– Exempt supplies: no HST is charged and the supplier generally cannot claim ITCs on related purchases. Examples include certain health and dental services, most financial services, and residential rent.
– Visitors and exports: nonresidents who purchase goods in Canada generally pay HST at point of sale; exported goods destined for use outside Canada are normally zero-rated. Refund/rebate programs exist in specific circumstances (e.g., some conventions/tour programs).
The HST’s effect on taxpayers
– Businesses: the intended advantage of HST is simplified bookkeeping (one remittance instead of federal/provincial systems), fewer cascading taxes on business inputs (because of ITCs), and potentially lower compliance costs. This can lower the cost of doing business, which proponents argue may reduce consumer prices.
– Consumers: opponents argue HST broadens the tax base by applying to some items previously exempt under PST systems, shifting some of the tax burden to consumers. The overall incidence depends on what items are taxed and how governments use the revenue.
How Canada’s HST works (mechanics)
– A vendor in an HST province adds the province’s HST rate to the sale price at POS.
– The vendor remits collected HST to the CRA in periodic returns, deducting ITCs for HST paid on purchases used in the business.
– The CRA forwards the provincial portion of HST to the province.
– If a business is selling across provincial lines (including online sales), place-of-supply rules determine whether GST/HST or GST plus PST (or no provincial tax) applies.
What is the purpose of the HST?
– Primary goals:
• Simplify tax administration by merging federal and provincial sales taxes into a single system in participating provinces.
• Eliminate “tax on tax” by allowing comprehensive input tax credits, reducing hidden taxation on business inputs.
• Reduce compliance costs for businesses that operate across provincial borders within HST provinces.
– Political and economic debates continue about distributional effects and whether consumers benefit from lower prices.
Does the United States have an HST?
– No — the U.S. does not have a federal sales tax or value-added tax (VAT). Sales taxes are imposed at state and local levels, administered by state authorities, and revenues are not pooled nationally as in Canada’s HST system.
Practical checklists
For business owners (starting or selling into Canada)
– Confirm whether your sales meet the $30,000 registration threshold.
– Register for a GST/HST account with the CRA if required or consider voluntary registration if under the threshold to recover input tax credits.
– Determine the applicable tax rate using place-of-supply rules.
– Update invoicing and point-of-sale systems to display GST/HST separately.
– Establish bookkeeping procedures to track collected tax and ITCs and to retain required records.
– Understand filing and payment deadlines and choose the correct reporting period.
– If selling into both HST and non-HST provinces, review provincial rules for PST registration and remittance.
– Seek professional tax advice for complex supply chains, cross-border sales, or when uncertainty exists about exempt/zero-rated status.
For consumers and visitors
– Know the HST rate in the province where you buy goods or services.
– Understand which goods are zero-rated or exempt (e.g., basic groceries are typically zero-rated).
– Tourists generally pay HST at point of sale; special rebate programs exist for some conventions or eligible purchases—check CRA or provincial programs for eligibility.
The bottom line
Canada’s HST combines the federal GST and provincial sales taxes into a single, province-specific rate in participating provinces. It simplifies administration for many businesses and allows input tax credits that remove tax cascading on inputs. However, provincial participation is optional, causing a mixed system across Canada: some provinces use HST, others have separate PSTs, and some have only the federal GST. Businesses operating across provinces must understand registration thresholds, place-of-supply rules, and provincial differences to comply correctly.
Sources and further reading
– Investopedia, “Harmonized Sales Tax (HST)” — Michela Buttignol
– Government of Canada — “Charge and Collect the Tax – Which Rate to Charge”
– Government of Canada — “When to Register for and Start Charging the GST/HST”
– Government of Canada — “General Information for GST/HST Registrants”
– Government of Canada — “Doing Business in Canada – GST/HST Information for Non-Residents”
– Government of Canada — “Foreign Convention and Tour Incentive Program”
– Provincial finance ministries (Ontario, Nova Scotia, New Brunswick, Newfoundland and Labrador, Prince Edward Island) — pages on HST and rates
– Retail Council of Canada — “Sales Tax Rates by Province”
– Government of Canada — “Elimination of the Harmonized Sales Tax (HST) in British Columbia and Reinstatement of … PST” (historical background)
– Provide the current HST total rates for each HST province (I can fetch up-to-date provincial rates).
– Walk through a sample registration and remittance timeline for a small business.
– Create a checklist tailored to your business type (retail, services, online seller).