Introduction

The Harmonized Sales Tax (HST) is a consumption tax applied in some Canadian provinces where both the federal goods and services tax (GST) and the regional provincial sales tax (PST) have been combined. This integrated tax system simplifies the taxation process for businesses while allowing for more streamlined administration. In this article, we will explain how HST is calculated, which provinces use HST, and how to apply it to your purchases.

Provinces that Use HST

The following Canadian provinces currently implement HST:

1. Newfoundland and Labrador

2. New Brunswick

3. Nova Scotia

4. Ontario

5. Prince Edward Island

Each province has its own HST rate that combines both GST and PST components.

How is HST Calculated?

Calculating the HST involves two steps:

1. Determine the applicable HST rate for the province in which the transaction is taking place.

2. Apply this rate to the total taxable cost of goods or services.

Step 1: Determine Applicable HST Rate

HST rates per province as of 2020 are as follows:

1. Newfoundland and Labrador: 15% (5% GST + 10% PST)

2. New Brunswick: 15% (5% GST + 10% PST)

3. Nova Scotia: 15% (5% GST + 10% PST)

4. Ontario: 13% (5% GST + 8% PST)

5. Prince Edward Island: 15% (5% GST + 10% PST)

For other provinces still applying separate GST and PST, their rates can be found on their respective government websites.

Step 2: Apply HST Rate to Total Taxable Cost

To calculate the total cost of goods or services, including HST, follow these steps:

1. Determine the total taxable cost by summing the cost of individual goods or services.

2. Multiply the total taxable cost by the applicable HST rate obtained in step 1.

3. The result is the HST amount that should be added to the purchase.

Example:

Let’s assume you’ve made a purchase in Ontario, where the HST rate is 13%. The total taxable cost of goods or services is $100.

1. First, multiply the $100 by the 0.13 (13% as a decimal) HST rate: $100 x 0.13 = $13.

2. Next, add the HST amount to the original total taxable cost: $100 + $13 = $113.

The final cost of your purchase, including HST, would be $113 in this example.

Conclusion

Understanding how to calculate and apply HST is essential for both businesses and consumers in Canadian provinces that use this tax system. Knowing the applicable rates for each province and the steps required to make accurate calculations ensures compliance with tax regulations and promotes informed purchasing decisions.