CALCULATING FEDERAL AND PROVINCIAL TAXES

Introduction
As a Canadian small-business owner, it is important to know what and when to charge your
customers in terms of sales tax.

The three types you’ll run into most frequently are the good and services tax (GST), provincial
sales tax (PST), and Quebec sales tax (QST).

There are many ins and outs of these specific taxes to keep in mind as you move forward with your
company and determine what tax to use with specific clients.
GST includes real and personal property

The federal tax of Canada is the GST, which applies to almost all goods and
services within the country.

This tax is managed by the Canada Revenue Agency and results in a 5 percent
charge on supplies purchased in Canada unless they are zero-rated or exempt.
PST is dependent on region

This retail sales tax is charged when a good or service is purchased or acquired
and is mandated by the provincial governments.

The PST applies to both taxable and zero-rated items and is paid to the
CRA.

For provinces including British Columbia, Manitoba, Quebec, and Saskatchewan,

small businesses are required to charge customers the PST, as well as 5 percent
GST.
When completing source documents that include calculations,
such as an invoice, it is important to know how to calculate
taxes correctly.

These taxes included GST, PST, HST and QST.

Depending on the province you work in, the calculations, and

percentages used, will be different.
HST is a Combo

Some provinces have chosen to participate in the HST, which pairs the GST with the
PST to create one tax overall.

These regions include New Brunswick, Prince Edward Island, Nova Scotia,
Newfoundland, Labrador, and Ontario.

Therefore, if your small business resides in one of these areas, you will collect a HST
rate that ranges from 13-15 percent and pay it to the CRA.
How to tax

To collect taxes, a small business has to create a GST/HST account with the
CRA.

However, there is a difference between a small supplier and one that needs to
register for a tax account. A small supplier is a partnership, corporation, or sole
proprietorship that has made less than $30,000 in revenue over the last four
calendar quarters in a row or in any single quarter.

Most small suppliers don’t have to collect the GST or HST. However, if the total
gross revenue for a calendar year adds up to $30,000 or more, the business is no
longer a small supplier and is required to set up an account with the CRA.

Once your small business has an account with the CRA, the agency will assign
your company a reporting period, during which you file your tax returns. It is
important to remember the date your business was registered with the CRA, as it
determines when that reporting period will take place.
Quebec stands alone

The province of Quebec requires small-business owners to work with Revenu Quebec to file and collect taxes.
A company address in the province, the hiring of an employee, and production and marketing activities that occur in
the region are all reasons for a company’s registration.

The GST and the QST must be charged during the sale of most goods and services within the province, according to
Revenu Quebec.
Taxable supplies are charged 5 percent GST and 9.975 percent QST and include sales of new residential facilities,
gasoline and cars, hotels, clothing, and food and beverages, among others.

Quebec small businesses are required to register with Revenu Quebec to file taxes and collect returns.

.
Provincial Sales Taxes

The Goods and Service Tax (GST) is a tax levied by the federal government on most
goods and services in Canada. The GST rate is 5%.

The provincial sales tax (PST) varies from province to province. In Manitoba and
Saskatchewan, the PST is applied to the base price of the sale, or the amount without
the GST included.
Manitoba
Sold goods to customer for $1,500.00. GST
is charged at 5% and PST is charged at 7%.
Invoice subtotal 1,500.00
GST: 5% * 1500 75.00
PST: 7%*1500 105.00
TOTAL 1,680.00
 Harmonized Sales Tax
In Ontario, Nova Scotia, New Brunswick, and Newfoundland and
Labrador, the GST and PST are harmonized at one total percentage.
This is called a Harmonized Sales Tax (HST).

Ontario
Sold goods to customer for $1,500.00, including HST at
13%.
Invoice subtotal 1,500.00
HST: 13%*1500 195.00
TOTAL 1,695.00
 Quebec Sales Taxes
The Provincial sales tax in Quebec or QST (Quebec Sales Tax) is a tax levied by
the provincial government, in this case, Quebec. The QST rate (in 2020)
is 9.975% and is calculated on the sale amount.

QUEBEC
Sold goods to customer for $1,500.00. GST
is charged at 5% and QST is charged at
9.975%.
Invoice subtotal 1,500.00
GST: 5% * 1500 75.00
QST: 9.975%*1500 149.63
TOTAL 1,724.63
 QUEBEC

Sold goods to customer for $,1850.00 plus $20.00 shipping. The GST and QST are
also charged on the shipping fee.

Invoice subtotal 1,850.00

Shipping 20.00

GST: 5% * (1850+20) 93.50

QST: 9.975%*(1850+20) 186.53

Total 2,150.03
Exercises

Invoice subtotal $614.98

Shipping $11.81
GST 5% $
QST 9.975% $
TOTAL $

Invoice subtotal $600.18

Shipping $40.91
GST 5% $
PST 7% $
TOTAL $
Check Answers
Calculate the subtotal, taxes, and total on the
following invoice.
SNOW HAVEN SKI RENTALS
12 Slope Drive PURCHASE ORDER 2322
Snowflake QC J9H 2K2
Phone: (819)777-7777

TO: Aylmer Ski Supplies

99 Front Street
Aylmer, QC J9H 2T8
(819) 684-8888
TAX
Date REQ. NO FOR ACCT. NO DATE REQUIRED
GST QST
17-Sep-14 R-125 Sales 12345678 5% 9.975% 25-Sep-14

VIA PREPAID COLLECT FOB TERMS

Our 2/10, net
Truck X
Address 30
Code Description Quantity Price Total
S-45789 Cross-country skis 10 981.38

Subtotal
TERMS AND CONDITIONS OF THIS ORDER
I acknowledge receipt of this order specifying prices and a definite shipping date. Make no substitutions or GST
changes without authorization from us. QST
We reserve the right to cancel this order if shipment is not made as promised.
TOTAL
 Taxes
Summary

In this lesson, you have learned how to calculate federal and provincial
taxes. It is important to remember that provincial tax rates and the way
they are calculated differ from province to province.

In Quebec there is both a federal and a provincial sales tax since the taxes
are not harmonized. The GST is 5% and the QST is 9.975%.

Both are calculated on the sales amount.

Reverse Taxes

1.14975 is the factor to divide by to arrive at amount before

taxes.

CALCULATOR FORMULA
Amount with sales tax / (1+(GST and QST rate
combined/100)) or 1.14975 = Amount without sales tax
Amount without sales tax * GST rate = GST amount
Amount without sales tax * QST rate = QST amount

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