The Goods and Services Tax (GST) and Harmonized Sales Tax (HST) are sales taxes administered by the federal government and applicable to most goods and services sold in Canada. All businesses, including e-commerce businesses, with operations or sales in Canada, must consider the impact of these taxes. Failure to register and remit the correct amounts can result in significant penalties. As of 2021, new digital e-commerce legislation has come into effect which expands the number of businesses required to register and remit GST/HST.
The following topics are covered in this article:
- Understanding GST/HST
- GST/HST registration
- Identifying supplies
- Place of supply
- GST/HST for digital economy businesses
Understanding GST/HST
GST/HST is imposed on the supply of taxable and zero-rated goods and services. All goods and services made or imported into Canada, such as clothes, footwear, and electronics, are taxable supplies. Exempt supplies are goods and services on which GST/HST cannot be charged and include medical services and most residential real estate. Zero-rated supplies are taxable supplies on which 0 per cent GST/HST is charged. Examples of zero-rated supplies are basic groceries, prescription medicine, and transportation services.
GST/HST registration
Non-resident companies may be required to register for GST/HST if they have sufficient factors suggesting they are carrying on business in Canada. The factors are determined on a case-by-case basis and include, among others, how many agents and employees a company has at a specific location in Canada, the type of goods or services supplied, and where the company is located. For more information about GST/HST mandatory registration requirements, and the potential benefits of registering voluntarily, read our article on GST/HST for Canadian businesses.
Generally, a non-resident in the business of supplying property located in Canada by way of lease will be considered to be carrying on business in Canada and will need to register for GST/HST if it is not a small supplier as explained in the noted article.
Identifying supplies
The form of a supply is an important consideration when determining the GST/HST rate applicable to the sale. A supply made electronically, other than the supply of physical goods ordered online, will generally be considered either a supply of intangible personal property (IPP) or a supply of a service. The factors and characteristics of each supply must be considered in order to determine the correct form.
