Harmonized Sales Tax (HST)
What is the HST?
The Harmonized Sales Tax (HST) is a consumption tax in Canada that combines the federal Goods and Services Tax (GST) with a province’s retail sales tax into a single levy collected by the federal government. The GST base is 5% nationwide; provinces that adopt the HST add a provincial component to create one combined rate at point of sale.
How the HST works
- Consumers pay HST on most goods and services purchased in provinces that use it.
- Vendors collect HST at the point of sale and remit it to the Canada Revenue Agency (CRA).
- The CRA allocates the provincial portion to the participating province.
- The system was designed to simplify bookkeeping and reduce duplicate tax administration for businesses.
Provinces that use the HST
As of 2025, five provinces use the HST:
– Ontario — 13%
– Nova Scotia — 15%
– New Brunswick — 15%
– Newfoundland and Labrador — 15%
– Prince Edward Island — 15%
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Other provinces have separate provincial sales taxes (PST or QST), and Alberta plus the territories (Northwest Territories, Nunavut, Yukon) collect only the federal GST. PST rates where they apply typically range from about 6% to nearly 10%.
Who must collect the HST
- Businesses operating in HST-participating provinces that have total taxable revenue of CA$30,000 or more in a year must register for a GST/HST account with the CRA, collect HST from customers, and remit it.
- Small suppliers (under CA$30,000) are not required to register or charge HST but may voluntarily register to claim input tax credits for HST paid on business purchases.
Exemptions and zero-rated supplies
- Zero-rated supplies (HST at 0%) include basic groceries, many books, certain agricultural and fishery products, and goods exported from Canada.
- Some goods and services are exempt (no HST charged and no input tax credits available), such as certain financial services and some health or educational services.
- Nonresidents and visitors pay HST on purchases in HST provinces, though limited rebates or programs may apply in specific cases.
Impact on consumers and businesses
- Proponents argue the HST reduces the cost of doing business by eliminating overlapping tax administration, which can lower prices and improve competitiveness.
- Critics contend it shifts more of the tax burden onto consumers, increasing the cost of many goods and services compared with a system that exempts more consumer spending from taxation.
Common questions
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What is the purpose of the HST?
To simplify tax administration by combining federal and provincial sales taxes into one harmonized rate and collection mechanism. -
How does the HST differ from GST+PST?
HST replaces separate provincial sales taxes with a single, combined rate that the federal government administers. In provinces without HST, GST remains separate from a provincially administered PST or QST. -
Does the United States have an HST?
No. The U.S. has no federal sales or value-added tax; states levy their own sales taxes independently.
Conclusion
The HST merges the federal GST with participating provinces’ sales taxes into a single tax collected by the CRA. It aims to simplify tax administration and reduce business compliance costs, but its effects on prices and tax burden are debated. Businesses operating in HST provinces must understand registration thresholds, which supplies are zero-rated or exempt, and how to collect and remit the tax.