What is the Harmonized Sales Tax (HST)?
Customers and companies in Canada pay the harmonized sales tax (HST) on consumption. It “harmonizes,” as the name indicates, federal and provincial sales taxes. As the name indicates, some jurisdictions utilize the HST; others use a comparable GST.
The HST began in 1997. Proponents say the tax simplifies administrative expenses for Canadian firms, making them more competitive and lowering consumer prices. The Canada Revenue Agency (CRA) collects and distributes HST to participating provinces.
Who pays HST in Canada?
At the point of sale (POS), buyers pay the HST. The seller adds the HST rate to the cost of goods and services and sends the tax to the CRA, the federal tax agency. The provincial government receives the HST from the CRA.
In 1997, the HST replaced the GST and PST in Canada. Sales taxes in Canada varied greatly since each province had its rates.
The HST unified federal and provincial sales taxes into a single, uniform charge to simplify recording and collection. According to proponents, businesses should save money because it streamlines sales-tax bookkeeping. Unfortunately, the HST often complicates companies’ existence. The Canadian government wanted a nationwide sales tax, but several provinces did not embrace the HST, preserving their systems and rates.
Businesses operating across provincial boundaries or nationwide—in physical locations or online—must cope with tax rate differences depending on whether the client is in an HST or GST/PST province. While GST is 5% everywhere, PST ranges from 6% to 9.975%.
Canadian Provinces and HST
Five of the 13 Canadian provinces utilize a harmonized sales tax:
- Since 1997, Newfoundland/Labrador
- New Brunswick (joined 1997)
- Nova Scotia (joined 1997)
- Ontario (2010) joined
- PEI (2012)
British Columbia, Saskatchewan, Québec, and Manitoba use federal and provincial sales taxes. Alberta, the Northwest Territories, Nunavut, and Yukon solely charge the federal sales tax.
British Columbia adopted the HST in 2010 but abandoned it three years later. Restoring its provincial sales tax system after 55% of citizens voted against it
HST Registration and Collection
Canadian businesses in one of the five provinces must collect and remit the HST. To apply sales tax, businesses must register for a GST/HST account with the CRA if they generate $30,000 or more in annual income.
Each province set its own PST collection percentage when joining the HST program and harmonized business. A business’s HST amount depends on which of the five provinces it works in. The rate was 13% to 15%, but most provinces currently charge suppliers—businesses with 30,000 in yearly revenue—which are exempt from ST. Businesses can voluntarily register to collect the tax to obtain input tax credits on products and services purchased for operations.
Exempt Products and Services
The HST applies to many products and services; others are zero-rated or tax-exempt. Zero-rated goods and services have 0% HST. Essential foods, publications, and agricultural and fisheries products are examples.
Foreign buyers of Canadian goods and services need not pay the HST if they use them abroad. Nonresidents visiting Canada, such as tourists, must pay the HST. Some may qualify for an HST rebate.
HST Impact on Taxpayers
The debate continues about how the HST affects consumers and taxpayers.
HST critics say it shifts the tax burden from companies to consumers. Proponents say the HST decreases taxes. They claim that the HST system cuts company costs, lowering Canada’s.
How does Canada’s HST work?
POS buyers pay HST. By adding the HST to product prices, vendors collect tax. The Canada Revenue Agency (CRA), the federal tax agency, receives the tax. The provincial government receives the HSTHST’s CRA.
The HST aims to combine federal and provincial sales taxes into a single, uniform charge to simplify recording and collection.
Does the US have HST?
There is no federal sales or VAT tax in the US. Most states have these taxes, but the revenue is not disbursed nationally.
Bottom Line
An HST combines federal and provincial sales taxes on products and services in five Canadian provinces. All participating provinces charge 15% HST except Ontario, which charges 13%.
The HST streamlined federal and provincial sales tax recording and collection in 1997. Critics claim the HST pushes taxation on consumers, but proponents say it lowers expenses.
Conclusion
- An HST combines federal and provincial sales taxes on products and services in five Canadian provinces.
- All participating provinces charge 15% HST except Ontario, which charges 13%.
- The HST unified federal and provincial sales taxes into a single, consistent Canada to simplify recording and collection.
- HST is not required for foreign purchases of Canadian goods and services used abroad.
- Critics claim the HST pushes taxation on consumers, but proponents say it lowers expenses.
