The Harmonized Sales Tax, or HST, is a sales tax that is applied to most goods and services in a number of Canadian provinces: New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island. It ranges from 13% in Ontario to 15% in other provinces and is composed of a provincial tax and a federal tax.
There are two types of exemptions for HST: direct exemptions and zero-rated goods and services. The difference is related to how businesses handle costs related to the exemptions, but as a consumer, you would not have to pay HST on items from either category.
Goods and services that are zero-rated from HST include:
Goods and services that are directly exempt from HST include:
There are special cases that are exempt from HST but are still taxed a provincial sales tax.
Other provinces in Canada do not use the HST and instead use a distinct Goods and Services Tax (GST) and/or Provincial Sales Tax (PST). Provinces with both a GST and PST or PST-equivalent include British Columbia, Saskatchewan, Quebec, and Manitoba. Quebec and Manitoba use the QST and RST respectively in lieu of a PST.
Some provinces and territories do not charge a PST. These include Alberta, the Northwest Territories, Nunavut, and Yukon.
To finance the First World War, Canada first introduced the Manufacturers’ Sales Tax (MST) along with other sales taxes in 1920. The MST was charged at every stage of the manufacturing process, causing a negative cascading effect. In 1991, the government replaced the MST with a consumption value-added tax known as the GST. The series of reforms included a provision to prevent double-taxation with the ability of individuals to claim input tax credits (ITCs) on purchases. This change to the GST was done with the exception of Quebec, who introduced their own form of value-added tax (QST). The GST rate was decreased from 7% to 5% between 2006 to 2008.
After 1996, several provinces adopted HST, a combination of PST and GST into a single value-added tax. Currently, Ontario, Prince Edward Island, New Brunswick, Newfoundland and Labrador, and Nova Scotia have adopted the HST. British Columbia, Manitoba, Quebec, and Saskatchewan still pay separate GSTs and HSTs, and Alberta, Northwest Territories, Nunavut, and Yukon do not have a provincial sales tax.