Doing business with other provinces: Are you charging the right sales tax rates?

I’ll be perfectly honest with you: sales taxes are one of my least favourite things to deal with in my line of work. Income taxes are complicated on their own, but sales taxes are another level altogether because they are so many different rules for every situation out there and on top that they can vary significantly on a province-by-province basis.

 

Which makes it super fun when your business is expanding to other provinces, right?

 

Alright, let’s start with the most straightforward situation: service businesses.

 

Service business (such as consultants) are fairly straightfoward from a GST/HST perspective. If you are providing a service from your home province to a customer in another province (whether in person or online), you charge at the rate based on your customer’s location, not yours.

 

For example: if you run a graphic design business from your home in Alberta, and you design a logo for someone in Ontario, you’ll charge them 13% HST, not 5% GST.

 

Tangible goods are where things can get complicated, because for some provinces this is where PST comes into play. Generally speaking, if you sell tangible goods to customers in other provinces you charge the GST/HST rate and PST rate of that province. Which means that you may have to track – and remit – PST separately to every province that you deal with.

 

For example: as part of your Alberta-based graphic design business, you have a contract to create postcard-sized marketing brochures for a client in BC. You will design, print, and ship the brochures directly to your BC client. Because this is a tangible item, you will need to charge 5% GST plus 7% PST to your BC customer.

 

If you are a retail-based business, you can often set up your online sales software to charge the appropriate rate of tax based on the customer’s location, which makes it a bit easier to handle. But don’t forget to register and remit those taxes!

 

And finally, the most important thing to remember: there are plenty of exceptions to be found when it comes to sales taxes. This includes zero-rated supplies and services, special distinction for goods being provided as part of an installation service, and many other situations. So do your research, and don’t hesitate to get professional advice.