Canadian GST/HST is applied on the final sale of a product or service in Canada, which is called Sales Tax. Generally speaking, if you provide taxable goods and services in Canada and your total taxable revenues exceed $30,000 in any single calendar quarter or in four consecutive calendar quarters, you will have to register for the GST/HST.
If you are a GST/HST registrant, you have to calculate your net tax for each GST/HST reporting period and report this on your GST/HST return. To do so, calculate:
- the GST/HST collected or that became collectible by you on your taxable supplies made during the reporting period; and
- the GST/HST paid and payable on your business purchases and expenses for which you can claim an input tax credit.
However, when you have foreign income or out-of-province income, this rule might be different. In general, Canada follows what is called “the place of supply rule” to determine GST/HST or provincial sales tax.
If you are selling to customers residing within the province where you are domiciled, your tax rate applies. However, if you are selling to customers residing outside your province, or are domiciled in another part of the world selling to customer residing in Canada, the tax rate of their province applies.
If you sell taxable goods and/or services in British Colombia, Saskatchewan, Manitoba or Quebec, you may be required to register with the provincial government to collect the provincial sales tax (PST) —called the Quebec Sales Tax in Quebec and the Retail Sales Tax in Manitoba.
Tax exemptions for small vendors vary from province to province. In Manitoba and British Colombia, for example, small vendors with total taxable revenues exceeding $10,000 are required to collect provincial taxes. There are no exemptions for small suppliers in Saskatchewan.
You do not need to charge GST, HST or provincial sales tax if your customer is outside of Canada. However, you likely need to charge sales tax based on your customer’s location.
If your customers are in the USA you generally do not need to charge state sales tax unless you have a Sales Tax “Nexus” (ie. an office, branch, employee or warehouse based in the US). If you do, you need to charge and remit state sales tax based on your customer’s location. There is no official federal sales tax like in Canada but if you do enough business in the US you may need to file a federal income tax return.
If your customers are from the EU or UK you may need to charge VAT. If you are selling to consumers (B2C), you need to calculate and remit VAT based on the purchaser’s location and you should use the MOSS system to remit VAT. If you are selling to businesses (B2B), you do not need to charge and remit VAT, you can simply use the “reverse charge mechanism” whereby you simply put that on your invoice.