Expanding a business beyond the U.S. and into Canada presents an exciting opportunity, but it also comes with important tax obligations. If you sell goods or services to Canadian buyers, understanding Goods and Services Tax (GST), Harmonized Sales Tax (HST), and Provincial Sales Tax (PST) is essential for compliance and avoiding costly penalties.

This guide breaks down everything U.S. businesses need to know about Canadian sales taxes, including how to register, collect, and remit them properly.

Understanding Canada’s Sales Tax System

Unlike the U.S., where sales tax varies from state to state, Canada has a multi-layered tax system that includes:

1. The Federal Goods and Services Tax (GST) – A 5% tax that applies across Canada.
2. Provincial Sales Tax (PST) – A separate sales tax levied by some provinces, with rates varying from 6% to 9.975%.
3. Harmonized Sales Tax (HST) – A combined federal and provincial tax collected in some provinces instead of separate GST/PST.

Depending on where your customers are located, you may need to collect only the GST or a combination of GST and either PST or HST.

Where and How Much Sales Tax to Collect

Here’s a breakdown of how sales taxes apply across Canada:

1. GST (5%) Applies in These Provinces/Territories:

• Alberta, Northwest Territories, Nunavut, and Yukon
• No additional provincial sales tax is collected in these regions, so businesses only charge the 5% GST.

2. PST (Provincial Sales Tax) Applies in These Provinces:

These provinces collect their own PST in addition to the 5% GST:

Important: PST is calculated before adding GST. For example, if a product is priced at $100 in Quebec, QST is $9.98, and GST is $5, for a total cost of $114.98.

3. HST (Harmonized Sales Tax) Applies in These Provinces:

Some provinces combine their provincial sales tax with GST into a single HST:

In these provinces, businesses collect one tax instead of separate GST/PST, making it easier to remit payments to the Canada Revenue Agency (CRA).

Who Needs to Register for Canadian Sales Tax?

If your U.S. business sells taxable goods or services to customers in Canada and your sales exceed $30,000 CAD annually, you must register to collect and remit GST/HST.

Some provinces (such as British Columbia, Quebec, Manitoba, and Saskatchewan) may also require you to register separately to collect their provincial sales tax (PST or QST).

How to Register for GST/HST

U.S. businesses can register for a GST/HST account with the Canada Revenue Agency (CRA) online or by mail. You’ll need to provide:

• Business name and address
• Estimated annual sales in Canada
• Type of goods/services sold

For PST/QST registration, you may need to register separately in the respective provinces.

What Is Taxable in Canada?

Most goods and services are subject to GST/HST, but there are a few key categories to keep in mind:

1.Standard Taxable Goods & Services

Most tangible goods, professional services, and digital products are taxable at the applicable GST/HST/PST rates. This includes:
✔ Automobiles (sales & leases)
✔ Electronics (computers, smartphones, TVs, and accessories)
✔ Furniture and home appliances (refrigerators, washers, sofas, and mattresses)
✔ Clothing and footwear (excluding some children’s essentials)
✔ Jewelry and luxury goods
✔ Legal and accounting services
✔ Books, magazines, and periodicals
✔ Hotel accommodations
✔ Event tickets and recreational services (concerts, sporting events, gym memberships)
✔ Digital products and streaming services✔ Automobiles (sales & leases)

2. Zero-Rated Supplies (0% Tax but Still Count Towards $30K Sales Threshold)

Certain essential goods are taxable at 0%, meaning businesses don’t charge GST/HST but can still claim input tax credits on purchases related to these goods. Examples include:

• Basic groceries (milk, bread, vegetables)
• Agricultural products (wheat, grain, raw wool)
• Prescription drugs & medical devices (hearing aids, artificial teeth)

Even though these products are not taxed, sales of zero-rate items count toward the $30,000 CAD threshold for GST/HST registration.

3. GST/HST-Exempt Services

Some services are fully exempt from GST/HST, meaning businesses do not charge tax and cannot claim input tax credits. These include:

• Educational services (tutoring, university courses)
• Financial services (banking, investments)

Provincial Rules for Non-Resident Vendors

In addition to federal tax rules, provinces with PST require U.S. businesses to register if they sell goods or services into their regions.

Here’s a quick look at their requirements:

✔ British Columbia (BC) – Businesses must register and collect PST if they sell or lease goods in BC, even if they have no physical presence there.

✔ Manitoba – Calls its PST Retail Sales Tax (RST). Businesses with less than $10,000 CAD in annual taxable sales are exempt from registering.

✔ Quebec (QST) – Since 2019, foreign businesses selling digital goods or services over $30,000 CAD must collect and remit QST.

✔ Saskatchewan – Businesses selling remotely into the province, including through digital platforms, must register and remit PST.

Cross-Border Considerations for U.S. Businesses

Shipping to Canada isn’t as simple as just adding tax. The Canada Border Services Agency (CBSA) has additional requirements for U.S. businesses, including:

1. Obtaining a Business Number (BN) – Issued by the CRA for import/export activities.
2. Determining Country of Origin – Goods may be subject to additional customs duties.
3. Complying with Import Restrictions – Some products (like food or electronics) require permits or safety certifications.

Final Thoughts

Expanding into Canada offers great opportunities for U.S. businesses, but navigating GST, HST, and PST can be complex. If you’re selling goods or services across the border, understanding your tax obligations is crucial.

To stay compliant:
– Determine where you need to collect GST, HST, or PST
– Register for tax accounts with the CRA and applicable provinces
– Track sales carefully to ensure compliance with the $30,000 CAD rule

Need expert guidance? Consult an accounting professional specializing in Canadian tax compliance to ensure smooth operations in your cross-border business.