Quebec Sales Tax: How to Calculate It
Managing sales tax rates can be a tedious process for businesses operating in Quebec or online businesses selling into Quebec. Most businesses are required to charge Quebec Sales Tax (QST) on goods and services, but knowing when you’re obligated to collect sales tax and keeping on top of changes in sales tax rates can be confusing and time-consuming.
You can avoid these hassles by using a sales tax compliance management tool, like TaxCloud. It automates QST calculation, saves time, and reduces the risk of mistakes.
How to Calculate Quebec Sales Tax
Step 1: Understand the Quebec Sales Tax (QST) Rate
Before you learn how to calculate Quebec sales tax, it’s important to understand the Quebec Sales Tax rate. In 2024, the QST rate was set at 9.975% and must be applied to the sale of most goods and services in Quebec. These include tangible personal property, digital products, and certain services.
However, Quebec also has a number of tax exemptions for items like groceries, some maple products, baby items and more. Learn more about sales tax exemptions in Quebec.
The QST rate is different from the federal Goods and Services Tax (GST), which is levied separately.
Quebec Sales Tax rate is calculated based on the sales price before other taxes are applied. This means that the QST is added on top of the base price of the goods or services being sold.
That means customers will have to pay $9.98 on a product costing $100. Businesses are required by law to charge the correct QST amount to comply with sales tax laws. Not doing so could mean a business ends up liable for uncollected sales taxes.
Step 2: Determine if GST is Also Applicable
In Quebec, you might also have to charge Goods and Services Tax on items you’re selling. Companies are required to charge 5% GST on many items. While there are exemptions in certain cases, such as the purchase of groceries and medical items, most items and services aren’t GST-exempt.
Learn more about items that are exempt or zero rated from GST.
What happens in the case of combined tax applicability?
In the case of combined tax applicability (where both QST and GST become applicable), these sales taxes have to be calculated separately and added together. This means that you will often need to add both the QST rate and the GST rate to the sales price when calculating the total Quebec sales tax that’s applicable.
Step 3: Calculate the QST Amount
Now that we have understood the difference between QST and GST rates and when they are applied, it’s time to calculate the QST amount.
Formula For Calculating Quebec Sales Tax:
Example:Â You can calculate QST on the sale of $100 with this formula by multiplying $100 x 0.09975 = $9.975.
So, in this case, you will be charging around $9.975 as QST on the sale of a $100 product. However, you need to make sure to round off the final amount to the nearest cent when applying QST. In this case, the taxable amount would be rounded to two decimal places and the amount would be $9.98. You can apply the formula to any transaction and determine how much QST to collect from the customer.
Step 4: Calculate the Total Sales Amount with QST
After the QST amount has been calculated, you have to determine the total sales amount by also calculating GST, if applicable. Let’s calculate the GST rate (5%) and add them together to get the total sale amount.
Calculating the Total Sales Amount
To get the total sales amount you need to add the sales price, Quebec Sales Tax, and General Sales Tax.
Let’s keep using our $100 sale example.
First, you have to multiply $100 by 0.09975. You will get $9.975 (rounded to $9.98). Then, you calculate GST by multiplying $100 Ă— 0.05 and the number you get will be $5.00. Add the three values (100 + 9.98 + 5) to get the total sales amount.
In this case, it means that the customer will pay a tax-inclusive price of $114.98 for the product.
Businesses have to calculate the correct total sales amount to ensure they are charging the right amount of tax to customers and remitting the correct amounts to the government.
Final Thoughts
Businesses located in Quebec or who sell into Quebec are mandated to be accurate in their QST calculations to stay compliant. The process can be daunting, however, when you have multiple items and some are tax exempt while others are not. You can save time and avoid human error by understanding the QST rate and when GST becomes applicable.
If you need help managing your Quebec sales tax obligations or calculating QST and other Canadian taxes for your ecommerce business, consider using a tax compliance software like TaxCloud to help. TaxCloud provides comprehensive sales tax support for the U.S. and Canadian markets.