Harmonized Sales Tax (HST)

Definition

The Harmonized Sales Tax (HST) is a combined federal-provincial sales tax system that integrates the federal Goods and Services Tax (GST) with provincial sales taxes (PST) in certain provinces. 

What is Harmonized Sales Tax?

The HST combines the federal GST with provincial sales taxes to create a single, harmonized tax rate. The total HST rate varies depending on the province or territory, and is higher than the federal GST rate due to the inclusion of the provincial portion. Each province sets its own rate for the provincial component of the HST. 

The HST applies to most goods and services sold or provided in participating provinces, including sales of tangible goods, services, and intangible property. Certain items, such as basic groceries, prescription drugs, and some medical and dental services, may be exempt from the HST.

Businesses operating in provinces with the HST system are required to register for HST purposes with the Canada Revenue Agency (CRA) and collect and remit the HST on taxable supplies. Registered businesses can claim input tax credits to recover the HST paid on business purchases and expenses.

Businesses are required to file HST returns periodically (monthly, quarterly, or annually). Failure to file returns or remit tax owing on time may result in penalties and interest charges.

The HST generates significant revenue for both federal and provincial governments, funding various government programs and services, including healthcare, education, infrastructure, and social assistance.

Example of Harmonized Sales Tax

John buys a new television for $500 from an electronics store in Ontario, where the HST rate is 13%. 

The breakdown of the purchase would be as follows:

• Television price: $500
• HST (13%): $65

The store collects $65 as HST from John and remits it to the government. This HST revenue is then distributed between the federal and provincial governments to fund public services and programs.