What a Harmonized Sales Tax Is and How It Works

A harmonized sales tax combines federal and provincial sales taxes into one rate

A harmonized sales tax (HST) is a single sales tax that merges the federal Goods and Services Tax (GST) with a province's sales tax into one rate. Instead of paying two separate taxes when you buy something, you pay one combined tax at checkout. This system is used in five Canadian provinces: Nova Scotia, New Brunswick, Newfoundland and Labrador, Ontario, and Prince Edward Island.

The HST rate varies by province because each province sets its own portion of the combined rate. Ontario's HST is 13 percent, while Nova Scotia's is 15 percent. The federal government collects the entire HST amount and then distributes the provincial share back to each province.

The main difference between HST and the older system is simplicity. Before HST, customers saw two taxes listed separately on receipts — the 5 percent GST and the provincial sales tax (which ranged from 7 to 10 percent depending on the province). Now there is one line item.

Key Takeaways

• HST combines federal and provincial sales taxes into a single rate that ranges from 13 to 15 percent depending on which province you are in.
• Five Canadian provinces use HST: Ontario, Nova Scotia, New Brunswick, Newfoundland and Labrador, and Prince Edward Island.
• The federal government collects HST and distributes the provincial portion back to each province that participates.
• Businesses registered for HST can claim input tax credits on goods and services they buy for their business, which reduces the tax they owe.

How HST is calculated at the register

When you buy an item in an HST province, the tax is calculated on the total price before tax. If you buy something for $100 in Ontario, the HST of 13 percent ($13) is added, making your total $113. The cashier or checkout system does this automatically — you do not calculate it yourself.

Most items are taxed at the full HST rate. However, some goods and services are exempt or taxed at zero percent. Basic groceries like milk, bread, and vegetables are zero-rated, meaning no HST is charged. Medical devices, prescription drugs, and dental services are also exempt. Restaurant meals and prepared foods are taxed, but raw ingredients you buy to cook at home are not.

The rules about what is taxed and what is not are set by the federal government, so they are the same across all HST provinces. A grocery store in Ontario and a grocery store in Nova Scotia both follow the same exemption rules.

How HST affects businesses

Businesses that earn more than $30,000 per year in revenue must register for HST. Once registered, they collect HST from customers on sales and send that money to the Canada Revenue Agency (CRA). However, they also get to claim input tax credits on the HST they pay when they buy goods and services for their business.

This credit system means a business does not pay HST on its full revenue. If a bakery collects $10,000 in HST from customers but paid $3,000 in HST on flour, eggs, and equipment, it only sends $7,000 to the CRA. The $3,000 is credited back to them. This prevents tax from stacking up as goods move through the supply chain.

Small businesses earning less than $30,000 per year do not have to register for HST, but many choose to so they can claim input tax credits. The choice depends on whether the credits they would receive outweigh the cost of tracking and filing HST returns.

Which provinces use HST and which do not

Five provinces have adopted HST: Ontario (13 percent), Nova Scotia (15 percent), New Brunswick (14 percent), Newfoundland and Labrador (15 percent), and Prince Edward Island (15 percent). The remaining provinces use either a provincial sales tax (PST) that sits on top of the GST, or in the case of Alberta, no provincial sales tax at all.

Quebec uses a different system called the Quebec Sales Tax (QST), which is separate from the GST but operates similarly to HST in that businesses can claim input tax credits. British Columbia, Manitoba, and Saskatchewan use a GST plus a separate PST, so customers see two taxes on their receipt.

If you buy something online from a seller in a different province, the tax you pay depends on where the seller is located and where the item is being shipped. This can get complicated, which is why many online retailers calculate tax based on the shipping address.

Why provinces switched to HST

Provinces adopted HST to reduce the administrative burden on businesses and to make the tax system more efficient. Before HST, businesses had to track two separate taxes, file two separate returns, and manage two sets of rules. HST consolidated this into one system.

The federal government also offered transition payments to provinces that switched to HST, which made the change financially attractive. However, HST has been controversial in some provinces. Ontario held a referendum on HST in 2007, and British Columbia held one in 2011 — both rejected it, and both provinces eventually moved away from HST.

From a consumer perspective, HST does not necessarily mean you pay more or less tax overall. The combined rate replaces what you would have paid in separate GST and PST. The main benefit is that the tax appears as one line on your receipt instead of two.

HST on online and cross-border purchases

When you order something online from a Canadian seller, HST is charged based on the shipping address if you are in an HST province. If you order from a seller outside Canada, HST may be added at the border when the package arrives, depending on the item's value and type.

If you live in an HST province and order from a seller in a non-HST province (like British Columbia), you typically do not pay HST — you pay whatever tax applies in the seller's province. The rules are designed so that tax is collected where the item is consumed, not where it is sold.

For businesses that sell across provinces, this creates complexity. A business in Ontario selling to a customer in British Columbia needs to charge British Columbia's GST and PST, not Ontario's HST. Most online retailers use address-based tax calculation software to handle this automatically.

Frequently Asked Questions

Is HST the same rate in every province that uses it?

No. Ontario charges 13 percent HST, while Nova Scotia, Newfoundland and Labrador, and Prince Edward Island each charge 15 percent. New Brunswick charges 14 percent. Each province sets its own rate within the HST system.

Do I pay HST on groceries?

Most basic groceries are zero-rated, so no HST is charged. This includes milk, bread, vegetables, meat, and eggs. However, prepared foods, restaurant meals, and some specialty items like vitamins are taxed at the full HST rate.

Can I get HST back if I am a tourist visiting from another country?

Canada does not have a tourist tax refund program like some other countries do. Visitors cannot claim back HST on purchases. However, some provinces offer HST exemptions on certain items like hotel stays for non-residents, depending on the province.

What happens if a business does not register for HST when they should?

The Canada Revenue Agency can assess penalties and interest on unpaid HST. Businesses are required to register once they cross the $30,000 revenue threshold, and failing to do so can result in significant back taxes and fines.

Why do some provinces not use HST?

Provinces choose their own tax systems. Some rejected HST after public referendums, while others prefer to keep GST and PST separate. Alberta has no provincial sales tax at all. Each province weighs the administrative benefits of HST against political and economic considerations.