Indirect taxes come in many different forms. In the US, there is sales tax. Across Europe and many other countries, there is value-added tax (VAT). For businesses making sales in Canada, there is goods and services tax (GST) to collect and remit.

This guide looks at the process of collecting GST in Canada, including how businesses register for an account, how they calculate and collect GST, and steps for them to take when it's time to file and remit.

What's in this article?

• Registering for a GST account
  
• Calculating and collecting GST
  
• Filing and remitting GST
  

Registering for a GST account

Before explaining how businesses can register for a GST account in Canada, it's important to discuss how indirect taxes work there. GST is applicable across the entire country. In addition to GST, many provinces have created their own additional provincial sales taxes. Six provinces – Labrador, New Brunswick, Newfoundland, Nova Scotia, Ontario and Prince Edward Island – have combined their provincial sales taxes with the GST, creating the harmonised sales tax (HST), which operates in a similar way to GST. The process to register and collect HST is the same as that for GST, so we'll take a look at both in this article.

The first step to collect tax in Canada is to register for a GST/HST account. A non-resident business supplying goods and services in Canada must register for a GST/HST account if they meet the following criteria:

• They provide taxable (including zero-rated) supplies in Canada over the course of carrying out business activities in the country, and they are not a small supplier.
  
• They make taxable sales of admission tickets in Canada for a place of amusement, a seminar, an activity or an event held in Canada (even if they are a small supplier).
  
• They host a convention in Canada and more than 25% of the delegates are residents of Canada (even if they are a small supplier).
  
• They are not a small supplier and they solicit sales for books, newspapers, magazines, periodicals or similar printed publications in Canada. Or they offer such goods for sale in Canada, either through an employee or agent, or by means of advertising directed at the Canadian market, and send the publications by post or courier to the recipient at an address in Canada.
  

A business qualifies as a small supplier if their worldwide taxable supplies are CAD$30,000 or less in any single calendar quarter and in the last four consecutive calendar quarters.

As of 1 July 2021, special rules came into force for digital-economy businesses. Non-resident businesses that sell taxable digital products or services, as well as other Canadian entities that are not registered under the normal GST/HST regime, are required to register if their revenue exceeds CAD$30,000 over any 12-month period. Such businesses may use a simplified GST/HST registration procedure. A business required to be registered under the simplified GST/HST can apply to register for normal GST/HST voluntarily, if it meets certain conditions. Businesses can register under the simplified GST/HST online.

Businesses might not meet the tax registration threshold at the country level, but still need to register to collect provincial taxes in Manitoba, Saskatchewan and British Columbia.

Calculating and collecting GST

The GST rate is 5%, while the HST rate is 13% in Ontario and 15% in New Brunswick, Newfoundland, Labrador, Nova Scotia and Prince Edward Island.

To determine the correct rate, businesses must understand the place of supply, which is where the sale or lease is made. Sales of goods and services within Canada are generally taxable at the location of the customer. Sales of services provided to Canadian customers by sellers established in other countries are generally taxable in Canada. While the Canadian government usually collects tax on sales to private persons, it does not charge tax on sales to business customers who provide the seller with their tax identification number or a certificate of exemption.

You can find a GST/HST rate calculator on the Government of Canada's website. Businesses that collect GST/HST are required to maintain records that show the tax collected. Additionally, businesses are required to let customers know if GST/HST is being applied to their purchase. Once they have determined the correct tax rate, they can start charging and collecting tax from their customers.

Filing and remitting GST

Businesses are required to complete and file a GST/HST return at the end of each reporting period. Additionally, businesses must remit the tax collected to the tax authority. Most registered businesses must file a return even if they don't have any business transactions or tax to remit.

Filing due dates vary based on the given reporting period, and businesses may have different filing and remittance deadlines. Filing due dates can be found at the top of the GST34-2 Return for Registrants. When a business registers for the GST/HST, the tax administration generally assigns an annual reporting period. However, a business may choose a more frequent reporting period.

For more information, here are detailed instructions for completing a GST/HST return on the Government of Canada's website. In addition, businesses can complete remittance online via the Government of Canada's website.