How to collect GST in Canada

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  1. Introduction
  2. Registering for a GST account
  3. Calculating and collecting GST
  4. Filing and remitting GST

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.

Here’s a guide on collecting GST in Canada, including how to register for an account, how to calculate and collect GST, and what to do 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 harmonized sales tax (HST), which operates similarly to GST. The process to register and collect HST is the same as GST, so we’ll cover both in this article.

The first step to collecting tax in Canada is to register for a GST/HST account. A nonresident 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 in the course of carrying on business activity in Canada, 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 mail or courier to the recipient at an address in Canada.

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

As of July 1, 2021, there are special rules for digital economy businesses. Nonresident businesses that sell taxable digital products or services and other Canadian entities that are not registered under the normal GST/HST regime are required to register if their revenue exceeds $30,000 CAD 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 voluntarily apply to register for normal GST/HST, if it meets certain conditions. You 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%, and 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, you must understand the place of supply, which is where you make your sale or lease. 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 you determine the correct tax rate, you can begin to charge and collect tax from your 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 your reporting period, and businesses may have different filing and remittance deadlines. You can find your filing due date at the top of the GST34-2 Return for Registrants. When you register for the GST/HST, the tax administration generally assigns an annual reporting period. However, you may choose a more frequent reporting period.

There 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.

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