Charging and collecting the GST/HST

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Do you need to charge and collect the GST/HST?

As a GST/HST registrant, you have to charge and collect the GST/HST from your customers when you make taxable supplies (other than zero-rated supplies) of property and services in Canada.

If you are not registered for the GST/HST (for example, a small supplier), you do not charge and collect the GST/HST to your customers. To determine if you need to register for the GST/HST and when to start charging the GST/HST, see Registering for a GST/HST account.

Almost everyone has to pay the GST/HST on purchases of taxable supplies of property and services (other than zero-rated supplies). However, certain persons may not always pay the GST/HST on taxable supplies. For more information, see:

How does the GST/HST apply?

It is important to know which supplies are taxable and at which rate. The following table shows the different types of supplies and how the GST/HST applies to them.

Differences in the tax status
Tax status What this means If you are a GST/HST registrant, then
Taxable supplies (other than zero-rated)

Most property and services supplies in or imported into Canada are subject to GST/HST. GST/HST applies to these supplies at the rate of the province. For the rates of each province, see GST/HST rates.

Example - Taxable supplies (other than zero-rated)

The rules for charities are different since most supplies made by charities are exempt.

There are certains situations where the GST/HST is applied differently, for example coupons, gift certificates, deposits, etc. For more information, see How the GST/HST applies in different situations.

  • You charge and collect the GST/HST on the supplies that are made in Canada.
  • You may be eligible to claim ITCs to recover the GST/HST paid or payable on purchases made to provide them.
Zero-rated supplies of goods and services

Some supplies are zero-rated under the GST/HST. GST/HST applies to these supplies at the rate of 0%.

Example - Supply taxable at 0%

  • GST/HST of 0% is charged. You do not collect the GST/HST on these supplies.
  • You may be eligible to claim ITCs to recover the GST/HST paid or payable on property and services acquired to provide these supplies.
Exempt supplies of goods and services

Some supplies are exempt from the GST/HST. GST/HST does not apply to these supplies.

Example - Exempt supplies

  • You do not charge or collect the GST/HST.
  • You generally cannot claim ITCs to recover the GST/HST paid or payable on property and services acquired to provide these supplies.

If you are a public service body that provides exempt supplies, you may be eligible to claim a public service bodies’ rebate for the GST/HST paid or payable on expenses related to making exempt supplies whether or not they are registered for the GST/HST. For more information, see Guide RC4034, GST/HST Public Service Bodies’ Rebate.

How the GST/HST applies in different situations

The following are special cases and how the GST/HST applies in those situations.

Agents

Agents

If you are acting as an agent (excluding auctioneers of goods) making taxable supplies of property and services on behalf of a person (who may be referred to as a vendor, owner or principal), different rules apply to determine who has to charge and account for the GST/HST on the sale. These rules depend, in part, on whether the vendor would have had to charge the GST/HST if the vendor had sold the goods or services directly to the purchaser.

To help you determine whether you are acting as an agent of another person, see GST/HST Info Sheet GI-012, Agents.

When the vendor has to charge GST/HST

If a vendor would have had to charge the GST/HST for taxable property and services sold directly to the purchaser, it is the vendor who must charge and account for the GST/HST on the taxable property and services sold through you as the agent.

If you are a registrant, charge and account for the GST/HST on your commission and on any other services provided to the vendor that relate to the sale of the property or services. Vendors who are registrants may be eligible to claim an ITC to recover the GST/HST paid or payable for your services.

See example - When the vendor has to charge the GST/HST

Joint election

A joint election can be made between a vendor (who may also be referred to as an owner or principal) and an agent when a vendor is required to collect tax, but would prefer the agent to do so. The joint election can also be made between a vendor and a billing agent. A billing agent is a person acting as an agent only for charging and collecting the tax, but not for making the sale.

By making this joint election, the agent becomes responsible for collecting, reporting, and remitting (as required), the tax on the supply of taxable property or services made on behalf of the vendor. The joint election is made by completing and signing Form GST506, Election and Revocation of an Election Between Agent and Principal. Both the vendor and the agent must keep a copy of Form GST506 in their records.

Agents who make this election must charge the GST/HST on the commission and other services they provide to the vendor that relate to this supply. Agents must also include the tax on their supplies in their GST/HST return.

The rules pertaining to bad debt adjustments, the recovery of bad debts, and returned goods apply to agents and billing agents of a vendor who have made the election.

For more information, see:

When the vendor does not have to charge GST/HST

If a vendor would not have had to charge the GST/HST for sales of goods (other than zero-rated or exempt sales of goods) to a purchaser, then, as a registrant agent, you have to charge and include the GST/HST on the sale of the goods in your net tax calculation. However, you do not charge the GST/HST on your commission or any other services provided to the vendor that relate to the sale of the goods.

Generally, agents have to charge and remit the GST/HST on goods sold for a registrant vendor that were not used in commercial activities. However, sometimes a registrant vendor may want to charge and remit the tax. In these situations, the vendor and agent may jointly elect in writing to make the sale of those goods taxable. When the goods are sold, the vendor charges the tax and includes it in its net tax.

The vendor also pays the GST/HST on the services provided by the agent and may be able to claim an ITC for this tax. However, the vendor cannot claim an ITC for other expenses related to the supply that were not charged to the vendor by the agent.

See example - When the vendor does not have to charge GST/HST

Zero-rated and exempt goods

When zero-rated or exempt goods are sold, neither the agent nor the vendor charges the purchaser the GST/HST. Whether the vendor is a registrant or not, the agent charges the GST/HST on its commissions and other services, such as advertising, provided in relation to the sale.

See example - Zero-rated and exempt goods

 

Auctioneers

Auctioneers

If you are a registrant auctioneer selling goods for a person (who may be referred to as a vendor, owner, or principal), you are considered to have made a taxable sale of goods. This means that it does not matter if the vendor is, or is not, a GST/HST registrant, because it is the auctioneer who must charge and remit the GST/HST on the sale of the vendor’s goods, unless you made a zero-rated sale of goods.

There is no GST/HST charged on your commission or other services provided to the vendor that relate to the sale of the goods, such as short-term storage and advertising.

For more information, see GST/HST Info Sheet GI-010, Auctioneers.

Auctioneers' election

A vendor (who may also be referred to as an owner or principal) and an auctioneer can make a joint election to have the vendor account for the GST/HST on the sale of auctioned goods if the following conditions are met:

  • both the vendor and auctioneer are GST/HST registrants
  • the supply of the goods would be taxable if made by the vendor
  • the goods are prescribed in the Property Supplied by Auction (GST/HST) Regulations for the purpose of the Excise Tax Act
  • at least 90% of the value of the goods sold at auction on a particular day on behalf of the vendor is for prescribed goods

Prescribed goods include:

  • motor vehicles designed for highway use
  • cut flowers, potted plants, and plant bulbs
  • horses
  • machinery and equipment designed for use in certain industries

Once the auctioneer makes a joint election with a vendor, the auctioneer collects the GST/HST on the sale of the goods and gives it to the vendor. The vendor accounts for the GST/HST. The auctioneer charges the vendor the GST/HST on their commission and on any services provided to the vendor, such as short-term storage and advertising and accounts for that GST/HST in their net tax calculation.

To make an election, complete Form GST502, Election and Revocation of Election Between Auctioneer and Principal. Both the vendor and the auctioneer must keep a signed copy of the election in their records.

Barter transactions and barter-exchange networks

Barter transactions

A barter transaction takes place when any two persons (suppliers) agree to an exchange of goods or services without the exchange of money. Suppliers calculate the value of the goods or services at the fair market value at the time of the transaction.

Since a barter transaction is two supplies (one from each party) with two suppliers and two recipients, a supply could be exempt, taxable, or zero-rated. For that reason, each supplier/recipient must deal with the transactions from their own point of view to find out whether they have to charge, collect, or pay GST/HST on the supply, and whether any input tax credit is available in connection with any GST/HST payable on the supply.

See example - Barter transactions

Barter-exchange networks

A barter-exchange network is a group of persons who have agreed in writing to accept credits (barter units) on account for the group members in exchange for property or services traded among members.

The accounts are maintained by an "administrator". The administrator is responsible for administering, maintaining, or operating a system of members' accounts to which barter units may be credited. When supplied by a GST/HST registrant, tax applies on the exchange value of the barter unit accepted as payment for the goods and services provided for the units.

The administrator of a barter-exchange network may apply to have the network designated for GST/HST purposes. Members of a designated barter-exchange network do not have to pay tax on barter units accepted in exchange for their supplies of goods or services. However, if registrants, they would continue to charge tax on their taxable supplies of goods and services provided for the barter units.

How to apply for network designation

The administrator of a barter exchange network must apply to the Canada Revenue Agency to have the network designated. Once designated, it relieves the members of the network from having to pay tax on barter units accepted in exchange for their supplies of goods or services.

A letter applying for designation is required, signed by the administrator (or an authorized individual), and containing all of the following information:

  • the name of the barter exchange network
  • the name, address, telephone number, trading name, and Business Number of the administrator of the barter exchange network
  • the effective date requested
  • a copy of the standard membership agreement of the barter exchange network describing the responsibilities of the members and the administrator
  • a statement from the applicant stating that it meets the definition of "administrator" of a barter exchange network
  • a statement from the applicant that certifies that the information given in the application and any document attached is true, correct, and complete, and signed by the administrator or an individual authorized to sign on behalf of the administrator.

Administrators outside the province of Quebec, send your letter to:

Director, Public Service Bodies and Governments
Excise and GST/HST Rulings Directorate
Policy and Legislation Branch
Canada Revenue Agency
14th Floor, Place de Ville, Tower A, 320 Queen Street
Ottawa Ontario K1A 0L5

Administrators in the province of Quebec, send your letter to:

Directeur, Direction des lois sur les taxes, le recouvrement et l'administration
Ministère du revenu du Québec
3800, rue de Marly
Québec (Québec) G1X 4A5

Coin-operated machines

Coin-operated machines

Generally, any goods, services, or a right to use a machine that you sell through vending machines or coin-operated machines is subject to the GST/HST. This includes products such as milk and fruits that are usually zero-rated.

The price of these goods, services, or rights to use the machine includes the GST/HST. You are considered to have collected the GST/HST when you remove the money from the vending or coin-operated machine.

See example - Coin-operated machines

However, the GST/HST is equal to zero on a supply of goods, services, or right to use a machine made through a coin-operated machine if it is designed to accept only a single coin of 25¢ or less as the total amount payable for the goods, services or right. For example, if you sell a lollipop in a vending machine for 25¢, and the vending machine only accepts one 25¢ coin, the GST/HST is equal to zero.

The above rule does not apply to machines that accept coins of more than 25¢ (such as $1 or $2 coins) or machines that accept more than one coin as the amount payable for the good, service, or right.

The right to use a coin-operated washing machine and clothes dryer located in a common area of a residential building is exempt from the GST/HST.

Commercial leases

Commercial lease

Generally, commercial leases from a landlord who is registered for the GST/HST are taxable.

Property taxes paid by a tenant are to be treated as part of the payment to the landlord for the rental of the real property, even if the tenant pays the taxes directly to the municipality. Therefore, the amount of property taxes payable by a tenant is considered to be part of the rent and is subject to GST/HST in the same way as the amount of rent payable by the tenant. This will be the case whether or not the rental agreement states that the payment of property taxes by the tenant is to be considered as "rent" or "additional rent"

However, if a tenant is directly liable to the municipality for the payment of property taxes, this amount is not subject to GST/HST.

Consignment sales

Consignment sales

A consignment sale is a transaction in which one party, the consignor, delivers goods to a second party, the consignee, who tries to sell the goods for the consignor.

If you, as a consignee, sell goods on consignment, the consignor still owns the goods until you sell them. This means that even though the consigned goods are in your possession, you do not include these items in your inventory..

Consignment arrangements consist of two types:

  • agency
  • buy and resell

If you are not buying and reselling goods, then it is likely that you are acting as the consignor’s agent.

Where you are buying then reselling goods, we consider two transactions to take place at the time you sell the goods:

  • you buy the goods from the consignor
  • you sell the goods to your customer

If the consignor is a GST/HST registrant, you pay the GST/HST on the price the consignor charges you (assuming your purchase of the goods is taxable, other than zero-rated) and collect the GST/HST from your customer on your selling price (assuming your sale of the goods is taxable, other than zero-rated). If the consignor is not a registrant, you do not pay the GST/HST to the consignor, and you collect the GST/HST from your customer on your selling price.

See example - Consignment sales

When you return any unsold items to the consignor, you do not have to pay the GST/HST on these items since the consignor never sold you the goods.

For more information, see GST/HST Info Sheet GI-009, Consigned Goods.

Deposits and conditional sales

Deposits

Do not collect the GST/HST when a customer gives you a deposit towards a taxable purchase. Collect the GST/HST on the deposit when you apply it to the purchase price.

If the customer does not make the purchase and loses the deposit, the forfeited deposit is subject to the GST/HST. If the customer is a GST/HST registrant, the customer can claim an ITC for the GST/HST paid on the forfeited deposit.

Calculate the GST/HST on the forfeited deposit as follows:

  • the GST is equal to the forfeited amount multiplied by 5/105
  • the HST is equal to the forfeited amount multiplied by:
    • 13/113 where the rate of 13% applies
    • 14/114 where the rate of 14% applies
    • 15/115 where the rate of 15% applies

See example - Deposits

These rules do not apply to deposits for returnable containers. For more information, see Returnable beverage containers.

Conditional and instalment sales

A conditional sale takes place when you transfer possession of goods to a customer, but ownership passes only after the sale meets certain conditions, such as when the purchase price has been paid in full. In this type of sale, the customer agrees to make payments for the goods over a period of time. The customer takes possession of the goods, but you keep title or ownership of the goods until the customer has met the specified conditions.

In an instalment sale, the ownership passes immediately but the customer pays the purchase price in instalments. You transfer title or ownership and possession of the goods at the time the agreement is entered into, and the customer agrees to make payments over a period of time.

In both cases, you have to include the tax in your net tax calculation for the reporting period that includes the earlier of:

  • the date you issued the invoice
  • the date you received payment

Any amount of tax that has not been paid or invoiced by the end of the month following the date you transferred possession or ownership of the goods (whichever is earlier) is considered due at that time and has to be included in your net tax calculation at that time.

Direct sellers

Direct sellers

Businesses in the direct selling industry sell their products directly to consumers through sales representatives or to independent sales contractors who, in turn, sell the products to purchasers. Their business structure is usually based on one or both of the two following models:

  • direct sellers who sell their products to distributors and independent sales contractors who, in turn, sell them to purchasers
  • network sellers who sell their products directly to consumers through sales representatives who receive commissions for arranging the sales
Alternative Collection Method

Direct sellers may apply for approval to use the alternate collection method (ACM), another method for accounting for the GST/HST on their sales of exclusive products.

Under the ACM, direct sellers charge and account for the GST/HST on the suggested retail price of the exclusive products as if they had made the sales directly to purchasers. For more information, including how to apply for approval to use the ACM, see GST/HST Info Sheet GI-125, Direct Selling Industry – The Alternate Collection Method for Approved Direct Sellers and Approved Distributors.

With the ACM, most independent sales contractors do not have to register for the GST/HST because they do not include revenues from their sales of exclusive products in their calculation to determine if they are small suppliers. For more information, see GST/HST Info Sheet GI-126, Direct Selling Industry – The Alternate Collection Method for Independent Sales Contractors.

Network sellers method

Network sellers who meet certain conditions may apply for approval to use the network sellers method.

As a result, the commissions and bonuses paid to sales representatives for arranging for the sale of the network seller’s select products would not be subject to the GST/HST and would not be used for determining whether sales representatives are small suppliers.

For more information, including how to apply for approval to use the network sellers method, see GST/HST Info Sheet GI- 052, Direct Selling Industry – The Network Sellers Method for Network Sellers and Sales Représentatives.

Early-payment discounts and late-payment surcharges

Early-payment discounts and late-payment surchages

Early-payment discounts

If you offer an early-payment discount on credit sales, charge the GST/HST on the full invoice amount even if your customer takes the discount.

When you invoice an amount that is already net of the early payment discount, charge the GST/HST on the invoiced amount.

See example - Early-payment discounts

Late-payment surcharges

Do not charge GST/HST on late-payment surcharges. GST/HST is payable only on the original invoiced amount.

See example - Late-payment surchages

 

Freight transportation service

Freight transportation service

A supply of a freight transportation service made in Canada can be taxable at the usual rate for a province, or it can be zero-rated (taxable at 0%).

For more information, see GST/HST information for freight carriers.

Gift certificates

Gift certificates

A gift certificate (including gift cards and online gift certificates) is generally a voucher, receipt, or ticket that:

  • has a stated monetary value or is for a particular supply of property or a service;
  • is issued or sold for consideration;
  • is accepted as payment or partial payment of the consideration for a supply of property or service;
  • has only to be presented as a means of payment without any other obligation imposed on the holder; and
  • has no intrinsic value.

Do not collect the GST/HST on the sale of a gift certificate. When a customer gives you a gift certificate towards a purchase, calculate the GST/HST on the price of the item and deduct the amount of the gift certificate as if it were cash. For more information about gift certificates, see GST/HST Policy Statement P-202, Gift Certificates.

See example - Gift certificates

Insurance claims

Insurance claims

Generally, when an insurance company pays out benefits to compensate a claimant under the terms of an insurance policy, it is providing an exempt financial service. The following is an explanation of two kinds of insurance claims:

  • life and health insurance claims
  • property and casualty insurance claims

See example - Insurance claims

Life and health insurance claims

Under life and health insurance contracts, the settlement of a claim is usually limited to the payment of financial benefits. These payments are financial services and are generally GST/HST-exempt.

Property and casualty insurance claims

Under property and casualty insurance contracts, the insurer agrees to settle a claim for loss or damage to property by:

  • making a cash settlement with the insured
  • paying the cost of repairs to the damaged property
  • paying the cost of replacing the damaged property

Cash settlements - A cash settlement is a financial service and is generally GST/HST exempt.

Repairs and replacements - Other than a cash settlement, an insurer can settle a loss related to damaged property by:

  • repairing or replacing the damaged property
  • compensating the insured for the cost of repairing or replacing the damaged property

If the insurer repairs or replaces the damaged property - The insurer purchases repair services or replacement property directly. The insurer would pay the GST/HST and would not be entitled to claim an ITC because the insurer would not be acquiring the property or service for consumption, use, or supply in the course of a commercial activity.

If insurer compensates the insured for the cost of repairing or replacing the damaged property - You, as the insured, acquire the repair services or replacement property directly and are therefore the recipient of the services or property. If you are a registrant, you may be eligible to claim an ITC. If you are a public service body, you may be eligible to claim a rebate. In this situation, the insurer can use the net-of-GST/HST method for settling the property and casualty insurance claim.

The net-of-GST/HST method results in an insurer making a payment for an insurance claim only to the extent of the actual loss suffered by the insured in accordance with the terms of the insurance policy. The amount paid to you by an insurer will be reduced by the amount that you are eligible to claim as an ITC or rebate related to the tax portion of the repair or replacement expense.

For more information, see GST/HST Memorandum 17.16, GST/HST Treatment of Insurance Claims.

Manufacturers' rebates

Manufacturers' rebates

Some manufacturers include a rebate application with the goods or services they sell. After buying the item from the retailer, the customer completes the application and mails it directly to the manufacturer. Since the payment of the rebate is a separate arrangement between the manufacturer and the customer, the retailer has to remit the GST/HST collected on the full selling price of the taxable goods or services without deducting the value of the manufacturer’s rebate.

The GST/HST rules for manufacturers’ rebates apply when:

  • the supply of goods or services to the customer is made either directly by the manufacturer or by another person such as a retailer
  • the customer is made aware in writing that the rebate includes the GST/HST

See example - Manufacturers' rebates

Some manufacturers give rebates to their customers through the retailer when the customer buys the goods. Even if the retailer applies the rebate toward the retail price of the goods, the retailer collects the GST/HST on the full retail price before deducting the rebate amount.

See example - Manufacturers give rebate to their customers through the retailer

When the manufacturer pays a rebate, it has the option of providing, along with the rebate, written indication that the rebate includes GST/HST. If the customer receiving the rebate is a registrant who is entitled to claim an ITC or a GST/HST rebate on the purchase, and the manufacturer provides written indication that GST/HST is included in the rebate, the customer will have to remit an amount of GST/HST. This amount is generally calculated by multiplying the rebate amount by one of the following tax fractions, as applicable:

  • the GST is equal to 5/105
  • the HST is equal to:
    • 13/113 where the rate of 13% applies
    • 14/114 where the rate of 14% applies
    • 15/115 where the rate of 15% applies

If the manufacturer pays a rebate to a customer and provides written indication that the rebate includes GST/HST, the manufacturer can claim an ITC in the reporting period in which it paid the rebate. The ITC is determined by multiplying the rebate amount by one of the above fractions, as applicable.

If the manufacturer chooses not to provide written indication that the rebate includes GST/HST, the manufacturer will not claim an ITC and the customer will not be required to remit any amounts of GST/HST.

Non-reimbursable coupons

Non-reimbursable coupons

These are coupons that you, as the vendor, issue and accept, and for which no one reimburses you. They entitle the customer to a reduction in the price for a fixed dollar amount or a fixed percentage amount. As the issuer, you have the option to include the GST/HST in the value of the coupons, when the coupons are used to purchase taxable goods or services (other than zero-rated goods or services).

If you choose to include the GST/HST in the value of the coupons, you treat them the same way as reimbursable coupons. This means that you charge and remit the GST/HST on the full price of the good or service and you can claim an ITC calculated on the tax fraction of the coupon value. Your coupon should state that the GST/HST is included in the value.

If you choose not to include the GST/HST in the value of your coupons, deduct the coupon value from the selling price before calculating the GST/HST.

See example - Non-reimbursable coupons

Other coupons

Other coupons

Other coupons (whether reimbursable or not) that are not for one specific monetary discount may:

  • offer a different percentage off the price of an item (such as 10% off the purchase of 5 or fewer boxes and 20% off the purchase of 6 or more)
  • offer an item for no charge if another item is purchased (such as two-for-one coupons)
  • contain more than one monetary discount such as 25¢ off a 750 ml soft drink, or 50¢ off a 1.5 litre soft drink

These coupons reduce the selling price of an item before GST/HST is added. Therefore, deduct the value of the coupons from the selling price before calculating GST/HST.

Real estate agents (services)

Real estate agents (services)

Generally, services from a real estate agent who is registered for the GST/HST related to the selling or renting of real property will be taxable even when the real property in question is exempt from GST/HST.

The real estate agent who is registered for the GST/HST has to charge and remit GST/HST on his/her commission and other services (other than financial services) provided to their clients. In turn, the clients may be able to claim an input tax credit to recover the GST/HST they paid for the agent's services if the real property is used in commercial activities.

Reimbursable coupons

Reimbursable coupons

Reimbursable coupons are usually called manufacturers’ coupons. They entitle the customer to a reduction of a fixed dollar amount on the purchase price. Vendors can expect to be reimbursed an amount by the manufacturer or another third party for accepting these coupons from customers. The value of the coupons includes the GST/HST when used to purchase taxable supplies (other than zero-rated supplies).

When you, as a vendor, accept a reimbursable coupon from a customer, you treat the coupon the same as cash. If the purchase is subject to tax, you charge the GST/HST on the full price of the item and then deduct the value of the coupon. We consider you to have collected a portion of the GST/HST equal to the tax fraction of the value of the coupon.

The tax fraction for the GST is 5/105, and the tax fraction for the HST is:

  • 13/113 where the rate of 13% applies
  • 14/114 where the rate of 14% applies
  • 15/115 where the rate of 15% applies

For example, a coupon for $1 off the selling price includes:

  • 5¢ for the GST ($1 × 5/105)
  • 12¢ for the HST ($1 × 13/113) where the rate of 13% applies
  • 12¢ for the HST ($1 × 14/114) where the rate of 14% applies
  • 13¢ for the HST ($1 × 15/115) where the rate of 15% applies

The manufacturer reimburses you for the coupon value of $1, which includes the GST/HST.

See example - Reimbursable coupons

Returnable beverage containers

Returnable beverage containers

Refundable deposits

There is no GST/HST on deposits for returnable beverage containers that are refundable to consumers.

When a bottler or manufacturer sells beverages in sealed returnable containers to you, the GST/HST is not charged on the refundable deposit. When you sell the beverages in the sealed containers to your customer, you do not charge the GST/HST on the refundable deposit.

When you accept used and empty containers from customers, no part of the refund to the consumer is a refund of tax and, therefore, you would not claim an ITC for that refund. When you return used containers to a depot or a bottler, there is no GST/HST charged on the refund you receive.

See example - Refundable deposits

Non-refundable deposits

In some provinces, only part of the deposit is refundable to the consumer. Non-refundable amounts such as environmental levies and recycling fees are separately charged in addition to the refundable deposit. In these cases, you only exclude the GST/HST from the amount of the deposit refundable to the consumer.

The non-refundable amounts are subject to the GST/HST at the same rate as the beverage.

See example - Non-refundable deposits

You have to collect and remit the GST/HST on non-refundable deposits you charge when you sell beverages. Also, you may be eligible to claim ITCs for the GST/HST you are charged on non-refundable deposits you pay when you purchase beverages, unless you are located in a participating province.

HST and returnable beverage containers

Special rules apply in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island where the deposits include tax, and only part of the deposit on certain beverage containers is refundable. A bottler or manufacturer sells the beverages to you and charges the deposit. The bottler or manufacturer sends us the HST included in the deposit. You do not claim an ITC for the HST included in the deposit. When you sell the beverages and containers to your customer, you remit the HST on the sale of the beverage and the HST included in the non-refundable part of the deposit.

Some registrants, such as take-out establishments that provide eating areas on their premises, may charge tax on the refundable deposit. If you are such a registrant, and you do not charge tax on the refundable deposit, you have to pay an amount equal to the tax on the refundable deposit when you collect the empty containers from your premises and redeem them for the refunds.

For more information, see Technical Information Bulletin B-089, Returnable Containers.

See example - HST included in the part of the deposit of beverage containers

 

Returnable containers

Returnable containers

The GST/HST generally applies to empty returnable containers. However, we consider usual packaging or containers (other than returnable beverage containers) to be part of the goods they cover or contain and tax them on the same basis as the goods they hold. For example, containers filled with medical oxygen are zero-rated.

When a customer returns a container that held goods, you can treat the transaction in one of two ways, depending on the terms of the original agreement as either:

  • a sale by the customer to you (the original supplier)
  • a refund you pay to the customer

If the return of the container is treated as a sale, the customer, if a registrant, charges you the GST/HST on the return of the container. You may be eligible to claim an ITC for the GST/HST payable on the purchase of the container.

If the return is treated as a refund, you may have to issue a credit note to the customer or, alternatively, the customer may have to give you a debit note. In that case, see Returned goods.

For more information, see Technical Information Bulletin B-038, Returnable Containers Other than Beverage Containers.

Returnable goods

Returnable goods

If you give customers a refund or credit for all or part of an amount they paid or were charged for goods they return, you can adjust, refund, or credit the customer the GST/HST you first charged or collected on these goods. If you do this, issue a credit note to the customer, or have the customer issue a debit note to you. Be sure the following information is included on the credit or debit note:

  • a statement or other indication that the document is a credit or debit note
  • your business or trading name, or the name of your intermediary, and your business number (BN), or the BN of the intermediary
  • the customer’s name or trading name, or the name of the customer’s authorized agent or representative
  • the date on which the note is issued
  • one of the following:
    • the amount of the adjustment, refund, or credit for tax
    • a statement that the total amount for which the note is issued includes the adjustment, refund or credit of tax, the tax rate (GST or HST) that applies to each taxable supply for which tax is reduced, and either the total amount and tax reduced for all the supplies to which the same tax rate applies or the total amount and tax reduced for each supply

You can deduct the amount of the GST/HST adjusted, refunded, or credited in determining your net tax for the reporting period in which you issued the credit note or received the debit note, as long as that amount was previously included in your net tax. In turn, if your customer claimed an ITC, the customer has to add that amount back when calculating its net tax. If your customer claimed a rebate, the customer has to repay that amount.

You have four years from the end of the reporting period during which you reduced the purchase price to make the adjustment, refund, or credit.

If you refund only a certain percentage of the purchase price (for example, 85%) and keep the balance as a restocking charge, you refund only 85% of the GST/HST you first collected. You would issue a credit note, or the customer would issue a debit note, for the amount of the GST/HST you refunded.

If you and the customer are GST/HST registrants, you can choose not to refund or credit the customer the GST/HST that was previously paid. You may wish to forgo the GST/HST refund if you have already sent us the tax and the customer has already claimed an ITC. In this case, you refund the amount without including the GST/HST that the customer first paid. You and your customer do not have to make any adjustments on your GST/HST returns.

Sale-leaseback arrangements

Sale-leaseback arrangements

When you purchase goods from a person who does not have to collect tax on the sale and you immediately lease the goods back to that person, the amount of the GST/HST on the lease is determined by deducting the amount paid or credited for the sale from the lease payments. The total credit is usually spread evenly over the number of lease payments.

Determine the credit for each lease payment at the beginning of the lease by dividing the sale price of the goods by the number of lease payments. If the terms of the lease change, recalculate this amount. The maximum you can deduct from any one lease payment is the amount needed to bring that payment to zero.

When there is a renewal, variation, or early termination in a lease that changes the number of lease payments, or when the lease is assigned to a new lessor but the lessee and the goods remain the same, you recalculate the amount that you can credit against each lease payment. When a lessee exercises an option to purchase the goods, you can deduct any unused credit from that purchase price up to the amount of the purchase price.

See example - Sale-leaseback arrangements

Sales of farmland

Sales of farmland

GST/HST Info Sheet GI–002, Sales of Farmland by Individuals, explains how the GST/HST applies to sales of farmland by individuals.  It provides examples of how the GST/HST applies to common situations involving these sales.

Sales of owner-occupied homes

Sales of owner-occupied homes

GST/HST Info Sheet GI–004, Sales by Individuals of Owner-Occupied Homes, discusses common questions on the sale of owner-occupied homes by individuals. It provides examples of how the GST/HST applies to common situations involving these sales.

Sales of a residence by a builder

Sales of a residence by a builder

GST/HST Info Sheet GI–005, Sale of a Residence by a Builder Who is an Individual, explains how the GST/HST applies to the sale of a house or residential condominium unit (condo unit) by a builder who lives in the house or condo unit before selling it. It provides examples of how the GST/HST applies to common situations involving these sales.

See also GST/HST and home construction.

You do not have to register if your only GST/HST taxable activity is selling real property other than in the course of a business.

Sales of vacant land

Sales of vacant land

GST/HST Info Sheet GI–003, Sales of Vacant Land by Individuals, explains how the GST/HST applies to sales of vacant land by individuals. It focuses on sales of personal use land rather than land sold in a business and provides examples of how the GST/HST applies to common situations involving these sales.

Trade-ins

Trade-ins

If, in the course of your business, you accept used goods in trade as full or partial payment for goods you sell or lease, special rules apply depending on whether the person from whom you are accepting the trade-in has to charge tax on the trade-in.

When the customer has to charge tax

If you accept used goods in trade from a person who has to charge the GST/HST (for example, if the trade-in is an asset of a registrant’s business), two separate transactions take place. You purchase the trade-in from your customer and you make a sale or a lease to the same customer. Collect the GST/HST on the full price charged for the goods you sell or lease, and pay the GST/HST on the value of the trade-in.

See example - When the customer has to charge tax

Both you and your customer can generally claim an ITC for the GST/HST paid or payable.

When you accept a trade-in from a customer who has to collect the GST/HST, make sure the invoice includes the information listed in the chart so that you can claim an ITC.

When the customer does not have to charge tax

A different rule applies for used goods you accept in trade from a person who does not have to charge the GST/HST (usually a person who is not a GST/HST registrant). A person may also trade in a leasehold interest in used goods.

In this case, you charge the GST/HST on the net amount (the price of the goods you sell or lease minus the amount you allow for the trade-in). This is similar to the treatment of trade-ins under most provincial sales taxes. For more information, see Technical Information Bulletin B-084R, Treatment of Used Goods.

See example - When the customer does not have to charge tax

Tips and gratuities

Tips and gratuities

Tips or service charges are not usually added to a bill. In general, consumers tip a percentage of the amount of a bill to service providers such as to waiters, waitresses, barbers, hairdressers, and taxi drivers. The percentage and whether the tip is calculated on the amount of the bill before or after taxes depends on the practice of the particular consumer.

A tip or gratuity that is freely given by a customer, for example, cash not recorded on a bill, is not subject to the GST/HST. However, if you add a mandatory or a suggested amount to the customer's bill as a service charge, you have to charge GST/HST on that amount.

Volume discounts

Volume discounts

When you offer volume discounts to reduce the sale price, you can reduce the GST/HST payable. If you reduce the price because your customer buys a certain quantity of goods, the amount of the GST/HST you charge depends on whether you offer the discount at the time you make the sale or after you make the sale.

At the time of the sale

If you offer a discount at the time of sale, you collect the GST/HST on the net amount (the sale price less the discount).

See example - Volume discounts at the time of sale

After the sale

Some businesses give volume discounts after they make the sale. The customer usually earns this type of volume discount over a period of time (for example, over a period of one year and not on a sale-by-sale basis). In this case, you have to decide if you want to credit the GST/HST related to the amount of the discount.

If you adjust, refund, or credit the GST/HST for the volume discount amount, issue a credit note to the customer to explain the adjustment, which is the discount and the related amount of the GST/HST. Alternatively, the customer can issue a debit note to you to indicate the adjustment. Treat credit or debit notes for this purpose the same way as you treat credit or debit notes for returned goods. For more information, see Returned goods.

You can deduct the amount of the GST/HST you adjust, refund, or credit to the customer if you included this amount in your net tax calculation for a previous reporting period. Your customer will have to repay any rebate claimed or add the amount of the GST/HST adjustment to their net tax if an ITC or rebate was previously claimed for the amount.

See example 1 - Volume discounts after the sale

If you do not adjust the amount of the GST/HST you charged, you do not have to adjust your net tax calculation. This is sometimes done when the customer is a GST/HST registrant and has already claimed an ITC. Any price reduction you make does not include a refund, adjustment, or credit of the GST/HST, and neither you nor the customer has to issue a credit or debit note for GST/HST purposes or make any adjustment on your GST/HST return.

See example 2 - Volume discounts after the sale

 

Warranty reimbursements

Warranty reimbursements

When warrantors, under a warranty in respect of the quality, fitness or performance of goods, reimburse warranty holders for goods or services covered under the terms of a warranty and provided by a third party, they may be eligible to claim ITCs for the GST/HST portion of the reimbursement.

See example - Warranty reimbursements

For example, if you are a warrantor you may reimburse a warranty holder who pays for repairs. The ITC you can claim is based on the part of the total cost that you reimburse the warranty holder. Calculate your ITC using the formula:

A × B ÷ C

A is the GST/HST payable by the warranty holder for the repairs;

B is the amount of the reimbursement; and

C is the cost to the warranty holder of the repair.

Include with the reimbursement a written statement that part of the reimbursement represents the GST/HST.

If the warranty holder is registered for the GST/HST, the warranty holder may be entitled to claim an ITC or a rebate for all or part of the GST/HST it paid on its purchase of the repairs.

However, part of the reimbursement a warranty holder receives from a warrantor is for some of the GST/HST the warranty holder paid on the purchase of the repairs. Where the warranty holder was also entitled to claim an ITC or rebate for the GST/HST on that purchase, we consider the warranty holder to have made a taxable supply at the time the reimbursement is paid.

The warranty holder has to remit an amount of tax in respect of the supply calculated using the following formula:

A × B ÷ C

A is the amount of the GST/HST reimbursed;

B is the total of ITCs and rebates that the warranty holder was entitled to claim for the goods and services; and

C is the GST/HST payable by the warranty holder for the goods and services.

Which GST/HST rate should you charge?

Generally, if you are supplying goods or services in your place of business, you will charge the GST or HST rate for your province or territory. A taxable supply (other than zero-rated), made in a non-participating province is subject to the GST. When such a supply is made in a participating province, it is subject to the HST.

For the rates of each province, see GST/HST rates.

If you are supplying goods or services to:

How do you calculate the GST/HST?

To help you determine the applicable taxes (including the provincial sales tax), use the GST/HST calculator. In provinces where you have to charge the GST and the provincial sales tax (PST), calculate the GST on the price excluding the PST.

You may have to calculate the GST/HST differently in certain situations. For example, discounts, late-payment surcharge payable, and then round off the amount on credit sales, deposits and conditional sales, coin-operated machines, etc. For more information, see How the GST/HST applies in different situations.

Calculating the round off fractional amounts

Round off the GST/HST to the nearest cent:

  • if the amount is less than half a cent, round down
  • if the amount is equal to or more than half a cent, round up

If your customer is buying more than one item and tax applies at the same rate on all items, you can total the prices of all taxable supplies of goods and services, calculate the GST/HST

What information do you need to include on your receipts or invoices?

You must let your customers know when the GST/HST is being applied to their purchases. You can use cash register receipts, invoices, contracts, or post signs at your place of business to inform your customers whether the GST/HST is included in the price, or added separately.

You have to show either:

  • that the total amount paid or payable for a supply includes the GST/HST
  • the amount paid or payable for the supply and show the amount of the GST/HST payable on the supply separately
  • the GST/HST rate that applies to the supply

If HST applies to the supply, show the total HST rate. Do not show the federal and provincial parts of the HST separately.

Invoice requirements for supplies made to GST/HST registrants

You have to give customers who are GST/HST registrants specific information on the invoices, receipts, contracts, or other business papers that you use when you supply taxable goods and services. They need this information to support their claims for input tax credits (ITCs) or rebates for the GST/HST you charged. For more information on what you must include on invoices for GST/HST registrants, see What records do you need to support your claim?

To ensure that your ITC claims only include GST/HST charged by someone who is registered for GST/HST, see Confirming a GST/HST account number. To confirm a QST number, go to Revenu Québec.

What do you do with the GST/HST you have collected?

You are responsible to hold this tax in trust until you send it to the CRA. You are required to remit all net tax owing with your returns and/or by instalments.  For more information on how to remit the tax, see Calculating the net tax to complete a GST/HST return.

What records do you have to keep?

You must keep the records that will support the information you provide on your GST/HST returns. Your records must allow you to calculate:

  • the amount of GST/HST you collected
  • the amount of GST/HST paid and payable on your eligible business purchases and expenses
  • the amount of tax to be refunded, rebated, or deducted from your net tax

Your records must describe the goods and services being traded in sufficient detail to determine whether or not GST/HST applies. Usually you must keep your records for a period of six years from the end of the last year to which they relate. However, we may ask you to keep the invoices longer than six years.

For more information, see Keeping records.

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