In Canada, the multi-level value added tax applied to the final sale of a service or product is known as Sales Tax. The untaxed is a tax of 5% levied on the supply of services and goods purchased in Canada, excluding some products that are either "zero-rated" or "exempt". A Federal Tax called (GST-Goods and Services Tax) is imposed by the federal government in every region of Canada. Except for Alberta, every province levies a provincial tax called (Provincial Sales Tax) along with GST.
The combination of PST and GST (which is the total tax that you have to pay) is known as HST (Harmonized Sales Tax) in the regions of Newfoundland, Labrador, New Brunswick, Nova Scotia, Prince Edward Island and Ontario. GST and PST are not applied to these regions separately; one combined tax called HST is imposed on them. In Quebec, the provincial sales tax is applied, which is called QST (Quebec Sales Tax). Quebec merchants are required to pay QST and GST for all the sales made. In Manitoba, the provincial sales tax is called RST (Retail Sales Tax). Manitoba Merchants are required to pay RST and GST for all sales made.
Depending on the territory or province in which you run your business, you need to collect only HST or either a combination of GST and PST, GST.
Here are some main HST/ GST rules that you should be aware of. Get more information about the in’s and out’s of HST/ GST on the Canadian government's GST/HST page for businesses.
In case you are operating a business in Canada or provide services/ sales in Canada and your revenue for the last four quarters go beyond CAD 30,000, you must register for HST/GST. Get more info about registering for GST/HST here. When you register for GST/HST, you will receive a business number (BN) - you will need to show this number on your invoices.
Sale Tax Rates
In case you are selling to the customers domiciled within the province where you are residing, then your tax rate will apply. However, if your customers are domiciled outside your province, or are residing in another part of the world, the tax rate of their province applies.
Below given is the breakdown of the tax rates:
HST is the combination of PST with GST to create one tax (which means, if you apply for HST, then you do not have to apply for GST). If you are residing in an HST-participating province then you have to collect sales tax at the following prices:
- Newfoundland and Labrador: 13%
- New Brunswick: 15%
- Ontario: 13%
- Nova Scotia: 15%
- Prince Edward Island: 14%
In case you are residing in the following provinces, you have to collect 5% GST as well as provincial sales tax, and the rates of provincial sales tax are as follows:
- Manitoba: 8% retail sales tax (RST)
- British Columbia: 7% provincial sales tax (PST)
- Saskatchewan: 5% provincial sales tax (PST)
- Quebec: 9.975% Quebec sales tax (QST)
In case you are residing in the Alberta province or in one of the three territories (Northwest Territories, Nunavut or the Yukon) then you do not require collecting sales tax on services and goods beyond the 5% GST.
In case you are selling to the customers domiciling in another Canadian province, you have to apply their tax rate to the invoices rather than yours.
Non-taxable and Taxable goods
All the sales made in Canada are classifying into three categories: those are zero-rated (means they are taxable but are taxed at 0%), those that are exempt from tax and those that are taxable. It is important to decide, in which catalog your product falls so that a proper tax rate can be applied to the invoices of your customers invoices.
A full list of zero-rated supplies
A full list of sales that are exempt from tax
Digital services and products are taxable in Canada.
You can set up invoice settings to suit any precise tax needs you might have by navigating to Settings > Configure ChargeMonk > Invoices, credit notes and quotes. Check full list of Canadian invoice requirements here.
Configuring Canadian GST/HST in ChargeMonk
This segment will help you walk through configuring the Sale Tax in ChargeMonk.
Step 1: Update your organization address
Ensure that you've entered the address of your organization at Settings > Configure ChargeMonk > Business Profile. You cannot setup taxes in ChargeMonk without completing this step in initially.
Step 2: Enable Tax
Go to Settings > Configure ChargeMonk > Taxes and click the Enable Tax tab.
Step 3: Choose a Price Type for CAD
When taxes are enabled, you will be forwarded to the page containing all the currencies that you have enabled for your site. Step 3 is setting up a price type (the price you quoted for your service/ product/add-on can be either tax inclusive, where the tax is included in the price, or tax exclusive, where the tax is added to the price) for each of these currencies.
Canadian Sales Tax regulation is needed for the price of your product to be tax exclusive.
Choosing a price type that is exclusive of tax will make sure that Sales Tax always displays in the invoices as added to the final price.
If you are selling to Canada in a different currency, check out how to configure price type for a region so your invoices are aligned with regulation here.
Step 4: Click Add Region and select Canada
Click on the Add Region and from the region list select ‘Canada'.
You will be forwarded now to a Canadian Sales Tax configuration page
Step 5: Enter your tax registration number
Here you can enter your Business Number (BN).
Step 6: Add your tax rates
Next up, enter your tax rates to the ChargeMonk so it can apply automatically to the appropriate amounts in invoices. You can do this in three ways:
- via CSV
- With Avalara, the third party application, which automates what tax rates are imposed on a particular invoice.
- Manually (in case you choose to add the taxes manually, remember to configure both PST and GST (or combined as HST) as they are applying to the regions in which you have a commercial existence).
Option AUpload your tax rates via CSV
Add your tax rates to ChargeMonk by sending a CSV file with the tax details you want ChargeMonk to be aware of.
Based on your tax needs, you have to provide some or all of the following info in the CSV file:
- State code (ISO 3166-2 province code)
- Country code (ISO 3166 alpha 2-letter -2 country code)
- Tax name (GST, VAT, etc.) and tax rate
- ZIP code
Jurisdiction type (say, the tax applicable country), name (name of the country), and the code allocated to the jurisdiction name. This information helps you to classify your taxes as per the jurisdiction easily, for reporting purposes.In case you need to set up over one tax rate in ChargeMonk, you have to repeat these details for each tax rate in the CSV file. You can also use this option to set up to four different tax rates (including PST/ GST).
How will ChargeMonk determine what tax rate is applicable?
ChargeMonk will easily determine which tax rate is imposed on a particular invoice by matching the address details of the customer with the details you have configured in your CSV file.
Order of matching location information:
- In case the subscription shipping address of the customer is available, it will be then used to match in the CSV file. If it is matched, ChargeMonk will apply the corresponding tax rate to the invoice.
- In case there is no shipping address, ChargeMonk will match the billing address of the customer with the CSV file. If it is matched, ChargeMonk will apply the corresponding tax rate.
- If both billing address and shipping address details do not match the information in the CSV file then the tax will not be applied.
Option BConfigure Tax Rates using Avalara
Avalara is one of the compliance SaaS solutions for compliance and taxation requirements. With the Avalara integration of ChargeMonk, you can manage taxation easily, eliminating the requirement to configure tax for each province manually. Avalara automates accurate address validation, rate determination, reporting and tax filing while fulfilling the jurisdiction rules.
Avalara also manages updates of tax rates, so you won't have to update the tax rates manually each time they change. All you have to do is combine your ChargeMonk site to Avalara account and consider a few prerequisites given below.
How to configure your ChargeMonk-Avalara integration.
Option CEnter your tax rates manually
If you are adding your tax rates manually, do so in two steps:
- Enter your GST tax rate: ChargeMonk will remind you of a GST tax rate as soon as you click the Add Tax Manually tab.
- Enter your province/state specific tax rate: in addition to this, you will have to setup a provincial tax that depends on which provinces you need a presence in. If you want to add a provincial tax rate, click the Add State Tax tab and select a region from the drop down menu.