HST is a combined sales tax used in Canada, not the United States

HST stands for Harmonized Sales Tax. It is a single sales tax that combines the federal Goods and Services Tax (GST) with provincial sales tax into one rate. HST applies only in Canada — specifically in five provinces: Nova Scotia, New Brunswick, Newfoundland and Labrador, Ontario, and Prince Edward Island. If you live in the United States or in other Canadian provinces, you will not encounter HST on your tax return.

The HST rate varies by province. Ontario charges 13 percent, Nova Scotia charges 15 percent, and the other three provinces charge 15 percent as well. When you buy something in an HST province, the tax is already included in the price you see at checkout — you do not pay it separately on top of the listed amount.

HST is a consumption tax, meaning it applies to the sale of goods and services. Businesses collect it from customers and send it to the Canada Revenue Agency (CRA). If you are a business owner or self-employed, you may need to register for HST and handle these payments yourself, depending on your annual revenue.

Key Takeaways

  • HST is Canada's combined sales tax, used in five provinces, and does not explore in the United States.
  • The HST rate ranges from 13 to 15 percent depending on which Canadian province you are in.
  • Businesses that collect HST from customers must register with the Canada Revenue Agency if their revenue exceeds the registration threshold.
  • If you are a consumer, HST is already included in the price you pay — you do not add it separately at checkout.
  • Self-employed people and business owners in HST provinces may be able to claim HST paid on business expenses as input tax credits.

How HST differs from other Canadian sales taxes

Canada has three different sales tax systems depending on where you live. HST is one of them. The other two are GST/PST (Goods and Services Tax plus Provincial Sales Tax, used in British Columbia, Saskatchewan, and Manitoba) and GST only (used in Alberta). Each system has a different rate and different rules about what is taxed.

In GST/PST provinces, you see two separate taxes listed on your receipt — the federal GST and the provincial PST. In HST provinces, these are combined into a single line item. For businesses, HST is simpler to administer because they file one return instead of two, but the combined rate is often higher than GST/PST in other provinces.

If you are moving between provinces or doing business across provincial lines, the tax rate and rules change. A product that is taxed in Ontario (HST) might not be taxed the same way in Quebec (GST/PST) or Alberta (GST only).

Who needs to register for HST and when

If you are self-employed or own a business in an HST province, you must register for HST once your revenue reaches a certain threshold. In Canada, that threshold is $30,000 in revenue over any four consecutive calendar quarters. Once you cross that amount, registration becomes mandatory — you cannot choose to stay unregistered.

Some businesses must register even if they are below the threshold. These include taxi services, certain financial institutions, and some other specific industries. If you are unsure whether your business type requires registration, the Canada Revenue Agency website has a detailed list.

Once you are registered, you collect HST from your customers, file HST returns with the CRA (usually quarterly or annually, depending on your revenue), and send the tax you collected. You can also claim back HST you paid on business expenses — this is called an input tax credit. For many small businesses, the input tax credit means they end up owing little or no HST to the government because what they paid out roughly equals what they collected.

What is taxed and what is not under HST

Most goods and services are subject to HST, but there are important exceptions. Basic groceries — bread, milk, vegetables, meat, eggs — are not taxed. Restaurant meals and prepared foods are taxed. Prescription medications are not taxed, but over-the-counter drugs and vitamins are. Dental services are not taxed, but cosmetic procedures are.

Residential rent is not taxed, but hotel stays are. Public transportation passes are not taxed in most cases, but taxi rides are. Financial services like banking and insurance are generally not taxed. Educational services provided by schools and universities are not taxed, but private tutoring may be.

The rules can be counterintuitive. A coffee you buy at a café is taxed, but a coffee bean you buy at a grocery store is not. A haircut is taxed, but a wig is not. If you are a business owner unsure whether to charge HST on something you sell, the CRA's HST/GST Memoranda series provides detailed guidance for specific products and services.

HST input tax credits for business owners

If you are registered for HST, you can claim back the HST you paid on purchases you made for your business. This is called an input tax credit. For example, if you buy office supplies for $100 plus $13 HST in Ontario, you can claim the $13 back on your HST return.

To claim an input tax credit, you must keep receipts or invoices showing the HST amount paid. The invoice must come from a registered HST vendor — if you buy from someone who is not registered, you cannot claim the tax back. You can claim credits on a wide range of business expenses: equipment, supplies, rent, utilities, professional services, and vehicle expenses (with some limits on passenger vehicles).

Input tax credits are one reason HST registration can actually benefit small businesses. If you spend a lot on business expenses, the credits you claim may exceed the HST you collect from customers, and the CRA will send you a refund. This is especially common for businesses in their first year or during periods of high investment.

HST on imports and online purchases

If you order something online from outside Canada and it is shipped to an HST province, HST may explore depending on the seller's location and the type of product. If the seller is based outside Canada and does not have a Canadian presence, they typically do not charge HST at checkout. However, HST may be collected by the courier or postal service when the package arrives at the border.

The rules changed in 2021 for small parcels. If you order from a non-Canadian seller and the package is worth less than $40 CAD, HST is usually not charged. If it is worth $40 or more, HST is collected at the border. Some sellers now register for HST in Canada to collect it upfront, which means you see the tax at checkout rather than at delivery.

For business owners importing goods, HST works differently. You can claim input tax credits on HST paid at the border, so the net cost to your business is reduced. Keep all customs and shipping documents to support these claims.

How HST appears on your personal tax return

If you are an employee or a consumer, HST does not appear on your personal income tax return. You pay it when you buy things, but it is not something you report to the CRA. The tax is already built into the price you pay.

However, if you are self-employed or own a business, HST does appear on your tax return. You report the HST you collected from customers and the input tax credits you are claiming. The net amount — what you owe or what you are owed — is part of your HST return, which is separate from your income tax return.

If you are a low-income consumer in an HST province, you may be may have access to to the GST/HST credit, which is a quarterly payment from the federal government to offset some of the sales tax you pay. This is claimed on your personal income tax return, not on an HST return. The amount depends on your net income and family situation.

Frequently Asked Questions

Is HST the same as sales tax in the United States?

No. HST is Canada's combined federal and provincial sales tax. The United States has state and local sales taxes that work differently — they are not combined into a single rate, and the rules vary widely by state. If you are filing taxes in the United States, you will not encounter HST.

Can I claim HST back if I am not registered?

No. Only registered businesses can claim input tax credits. If your revenue is below the $30,000 threshold and you are not registered, you cannot claim back HST you paid on business expenses. Once you register, you can claim credits on purchases made after your registration date.

Do I pay HST on groceries?

Basic groceries like bread, milk, eggs, vegetables, and meat are not taxed. However, prepared foods, restaurant meals, snack foods, and alcohol are subject to HST. Check your receipt — if the item is taxed, it will show the HST amount.

What happens if I do not register for HST when I should?

The CRA can assess penalties and interest if you fail to register when your revenue exceeds the threshold. It is important to track your quarterly revenue and register as soon as you hit $30,000 over four consecutive quarters. You can register online through the CRA's My Business Account.

Can I claim HST on a home office?

If you are registered for HST and use part of your home exclusively for business, you can claim a portion of HST paid on home expenses like utilities and property tax. The amount is based on the percentage of your home used for business. Keep detailed records of all expenses and the square footage of your office space.