Mastering Sales Tax Compliance in Canada

Studies suggest that thousands of new businesses open in Canada each month. As a startup founder or entrepreneur, you may find sales taxes in Canada complicated.

This blog will teach you everything you need to learn about Canada’s federal and provincial sales taxes. Let’s dig into the world of sales tax in Canadian provinces for new Canadian businesses.

Are you a foreign business selling in Canada? Check out this post on selling to Canada with info for you!

Sales Tax in Canada: A Guide for New Businesses

As a new business owner, you will want to know about your GST/HST obligations and additional Provincial Sales Tax requirements.
Canadian merchants who sell goods & services to other Canadians deal with two types of sales taxes:

1. GST/HST: The goods and services tax (GST) is a federal tax that’s applied nationally. Some provinces levy a harmonized sales tax (HST) which includes a provincial sales tax but the CRA administers it as one combined tax.
2. PST: Provincial sales tax (PST) is levied by most provinces and territories in addition to GST. While typically called PST, in Quebec it’s called Quebec Sales Tax (QST) and in Manitoba it’s called Retail Sales Tax (RST).

Now, let’s look into the sales tax rates in each jurisdiction.

Place of Supply: Which Taxes Should You Charge?

When you’re selling goods and services online, sales taxes in Canada become more complex. The good thing is that Canadians have to abide by the “place of supply rule,” making sales tax application relatively simple. ‘Place of supply’ simply means the province or territory where the buyer is located. That’s relatively simple with bricks and mortar businesses where you sell to buyers within your province. But it’s more complicated when selling online.

You’ll have to figure out: Who are you selling your product to and where are they located?

In this, location is everything. When selling goods or services online, you should note the postal code or IP address of the buyer to pinpoint their location (the “place of supply”) and charge the right amount of taxes based on their location. For example, if they live in BC, you’ll have to charge BC’s 7% PST rate and 5% for GST.

Sales tax calculation software can automate this process for you. For example, TaxCloud uses each customer’s destination address to calculate and charge the correct sales tax every time.

When Online Sellers Need to Pay Sales Tax

If you’re an online seller selling into another province, you might not need to charge sales tax on your sale. There are two circumstances where you won’t need to charge taxes:

1. If the goods and services you’re selling are tax exempt or zero rated supplies.
2. If you haven’t met the threshold in that tax jurisdiction to be required to register for and charge sales taxes.

Sales Tax Exemptions

You need to determine if your goods or services are taxable or not in the different jurisdictions you’re selling in. Which goods and services are subject to tax can vary from one sales tax jurisdiction to another. For example, the province of BC doesn’t tax restaurant meals but those same meals are subject to GST in BC.

We created a chart with some examples of items that could be exempt in different tax jurisdictions. If items you sell are on this list, make sure to read the fine print of the exemption to ensure you qualify.

Thresholds for Registering and Charging Sales Tax by Jurisdiction

Online sellers in Canada might need to register with up to five sales tax agencies. While the Canada Revenue Agency (CRA) handles all GST payments across the country and HST payments in the jurisdictions with HST, you might also need to register with separate provincial agencies in  British Columbia, Saskatchewan, Manitoba, and Quebec.

As of 2025, the threshold for registering for GST/HST is $30,000 CAD in taxable worldwide revenue over the past four consecutive calendar quarters for GST/HST. Anyone making less than that is considered a Small Supplier and does not need to collect GST/HST. The thresholds for charging provincial sales taxes in particular provinces are different depending on the province.

Specific Kinds of Companies

Wondering how sales taxes apply to different kinds of companies. We break that down below.

SaaS and BaaS Companies

Companies offering software as a service (SaaS) or banking as a service (BaaS) products have to charge HST or GST based on their customer’s location if their sales exceed the $30,000 CAD threshold. If you’re selling to non-Canadians, you won’t have to charge/remit Canadian sales tax on those transactions.

Marketplace Facilitators

Marketplace operators and facilitators must also register for sales tax collection, especially if they are selling in multiple jurisdictions. Most online marketplace platforms have to simply use the normal procedures for charging sales taxes.

Consulting Companies

Things get a little tricky when it comes to consulting companies. Working with Canadian clients requires you to charge HST, GST, or applicable PST based on your client’s location. However, a business dealing with non-Canadian clients doesn’t have to charge/remit sales taxes in Canada on those transactions.

Key Tidbits about Taxation in Canadian Provinces

Overwhelmed and need a TL;DR version? Here are some of the most important points mentioned above – and a few additional details about sales tax in Canada to keep in mind.

GST Facts:

• Small Supplier Status: The government will treat you as a small supplier if your annual earnings are less than $30,000. While; you might still have to charge provincial taxes,  but GST and HST are optional underneath the$30,000 CAD threshold.
• GST or HST Registration: You should determine your taxable sales by checking if you have reached the threshold or not. As soon as your supply has earned you over $30,000 CAD in worldwide sales, you need to  register and charge GST/HST on your sales going forward.
• GST/HST Remittance Frequency: The Canadian government will determine the frequency of your GST/HST filings and payments and communicate that expectation. However, generally speaking, here’s what you can expect based on your annual revenue (in CAD):
  • Less than $1.5 million = remit sales tax annually
  • $1.5-6M = remit sales tax quarterly
  • $6M+ = remit sales tax monthly

Provincial Sales Tax Facts:

• Provincial Sales Tax: Selling taxable supplies (i.e., goods & services) in provinces like Quebec (called QST), Manitoba (called RST), Saskatchewan (PST), or British Columbia (PST) means you now have to register for PST as well.
• PST Remittance Frequency: For provinces that charge provincial sales taxes separately (Quebec, British Columbia, Manitoba, Saskatchewan), your remittance frequency will be determined based on their criteria. These vary from province to province but the province’s tax jurisdiction will tell you how frequently you’ll need to file.

Foreign Sales Taxes for Canadian Businesses Facts:

• Selling Outside Canada: You typically don’t have to worry about GST/HST/PST if you’re selling to non-Canadians who are purchasing these products outside of Canada. If a foreigner does make a purchase from you in Canada, however, then these GST/HST obligations come into play.
• US Sales Taxes: If you’re selling goods and services to someone based in the US, then you only charge them state sales tax if you fall under that state’s Sales Tax Nexus, i.e., you have an office, branch, employee, or warehouse in that state or if you’ve achieved economic sales tax nexus.
• VAT in the EU or UK: If you have customers based in the United Kingdom or European Union, you may have to charge VAT.
• Penalties: If you don’t file or remit your taxes properly then the government may end up taking action against you.

Final Remarks

Now you understand the basic sales tax rules in Canada. Now that you understand the basic sales tax rules in Canada, make sure you know whether you need to collect GST/HST or any applicable provincial sales taxes — and register accordingly. You could be on the hook for uncollected sales taxes if you are liable for them but don’t charge them to your customers.