DOING BUSINESS ACROSS CANADA
Means Answering to 14 Different Tax Jurisdications

Every purchase or sale transaction you make in Canada has indirect tax consequences. Although you encounter indirect tax daily, it’s often overlooked and just one oversight can quickly add up. Our Indirect Tax Team builds strategies to ensure you’re paying the right rate, in the right jurisdiction, at the right time, while identifying opportunities for significant tax rebates.

 

In today’s economic landscape, indirect taxes often represent an important burden overlooked by organizations. However, as transactions become more complex and companies look to expand, the need to properly address potential indirect tax implications is critical to avoid errors which may lead to unnecessary exposures.

The Business of Navigating Canada’s Tax Jurisdictions

Article by: Heather Weber | Bio | Contact

Canada operates within a complex indirect tax system. While some provinces have harmonization between federal sales tax (GST) and provincial sales tax (PST, QST or RST), others operate with two systems in parallel (HST). The lack of indirect tax harmonization across the country can make tax compliance and reporting challenging for both domestic and foreign corporations operating in Canada.

As a business looking to successfully expand your operation and drive growth across the country, how can you juggle the time and resources necessary to stay on top of complicated and fast-changing indirect tax compliant requirements?

The information below is a general overview. Depending on your unique circumstances and which business structure you are operating under, there may be exceptions to many of these rules and your tax obligations may vary. A member of MNP’s Tax Services team will be able to perform an in-depth assessment of your business and give you a 360 degree perspective as to how your business may be impacted by indirect taxes. Let’s discuss:

Charging and Collecting Sales Tax

In Province

If you are operating a business in Canada, it’s crucial to know how and when to charge sales tax for the goods and services you sell and supply to your customers or clients.

Depending on the province(s) or territory or territories in which you operate your business, you need to collect either:

  • A combination of Goods and Services Tax (GST) and Provincial Sales Tax (PST)
  • GST only
  • Harmonized Sales Tax (HST)

HST combines PST with GST to create one tax. If you operate in a province participating in HST, you will be required to collect sales tax at the following rates:

  • Nova Scotia: 15%
  • Prince Edward Island: 15%
  • New Brunswick: 15%
  • Newfoundland and Labrador: 15%
  • Ontario: 13%

If you operate in any or all of the provinces below, you are responsible for collecting 5% GST as well as provincial sales tax (if applicable), with provincial sales tax rates as follows:

  • Quebec: 9.975% Quebec sales tax (QST) on retail price only
  • Manitoba: 8% retail sales tax (RST) on retail price only
  • Saskatchewan: 5% provincial sales tax (PST) on retail price only
  • British Columbia (B.C.): 7% provincial sales tax (PST) on retail price only

If you operate in the province of Alberta or in one of the three territories (Northwest Territories, Nunavut or the Yukon), you will only need to collect 5% GST on goods and services.

Applying the Tax – An Introduction

Generally, when selling and delivering taxable goods and / or services to customers in multiple provinces or territories, the sales tax that applies in your customer's province or territory is what you should be collecting as a corporation. The application of the tax depends on what you are selling or the type of service you are providing. For instance:

GST only Provinces

In most circumstances, if you sell goods and services to residents of Alberta, Nunavut, Northwest Territories or the Yukon, you are required to collect GST.

HST Participating Provinces

Typically, when you sell goods and services to HST participating provinces (Prince Edward Island, New Brunswick, Newfoundland and Labrador, Nova Scotia and Ontario), you are required to collect HST on the amount applicable in the province and include it in your GST / HST return. Assuming you are already registered for GST, you are also automatically registered for HST, even if you do not operate in an HST participating province.

PST

British Columbia

In most cases in the province of B.C, you will be required to register to collect PST if you regularly do all of the following:

  • Sell taxable goods to customers in B.C.
  • Solicit orders for purchase of taxable goods (through advertising or other means) in B.C.
  • Deliver taxable goods to a location in B.C.
  • Accept purchase orders for taxable goods from customers located in B.C.

You are also required to register to collect PST if you regularly do all of the following:

  • Sell taxable software or telecommunication services to customers in B.C.
  • Accept purchase orders for taxable software or telecommunication services from customers in B.C.
  • Solicit persons in B.C. (through advertising or other means) for orders to purchase taxable software or telecommunications services.

Saskatchewan

Generally speaking, if you sell goods and services to residents of Saskatchewan, the province prefers that you register to collect PST as a convenience to your customers. If you choose not to register, the responsibility will be on your customers to pay PST on their out-of-province purchases.

QST

In most cases, you are obligated to register to collect and remit QST when you have operations in the province (such as production or marketing activities), when you hire an employee or employees and/or have an address in Quebec. Otherwise, you are not obligated to collect QST on behalf of the province if you sell taxable goods and services to residents of Quebec.

RST

Usually when selling taxable goods and services to residents of Manitoba, you are required to register under the Retail Sales Tax Act and collect retail sales tax, if the following apply:

  • You solicit sales in Manitoba (via advertising or other means).
  • The taxable goods are delivered to Manitoba.
  • You accept orders from residents or visitors of Manitoba.
  • The taxable goods are not for resale but rather for consumer use in the province of Manitoba.

International Customers (Outside of Canada)

Generally, if you sell goods and services to international customers, you are not required to collect GST, HST, PST, QST or RST provided the customer takes delivery of the goods or services outside of Canada. If international customers make purchases within your province or territory, they are generally required to pay the applicable taxes.

Conclusion

With a thorough understanding of the extensive nuances of Canada’s integrated tax landscape, our Indirect Tax Services team can work with you to develop a comprehensive tax strategy that effectively meets your filing obligations while finding ways to improve your day-to-day reporting, mitigate errors and minimize your exposure. By understanding your business’ unique needs, we ensure you meet your obligations in all relevant jurisdictions and help you capitalize on all opportunities available – further positioning you for prosperity and success.

For more information, contact Heather Weber, CPA, CA, Indirect Tax Services Leader at heather.weber@mnp.ca

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