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How do I calculate GST HST?

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Question: How do I calculate GST HST?

Answer:

You charge the GST (Goods and Services Tax) of 5 percent on taxable goods and services.

Calculating GST and invoicing is a really simple matter in Alberta, the Northwest Territories, Nunavut and Yukon as these provinces and territories have no provincial sales taxes; GST is charged by calculating 5% of the item's sale price and adding it onto the bill.

In provinces where there is PST (Provincial Sales Tax) as well and you have to charge both GST and PST, you calculate the GST on the price of the goods or service before PST has been applied.

For example, in Manitoba, the Retail Sales Tax is 7 percent. Suppose you sold a wind chime at a price of $39.99 (a taxable good). RST, like GST, is charged on the total selling price of the merchandise. (The total selling price includes delivery, mailing, transportation, or handling charges.) So in this case your sale would be calculated as:

1 Wind chime        $39.99
GST @ 5%        2.00
PST @ 7%        2.80

Total Price        $44.79

Note that Quebec and Prince Edward Island are the exceptions to this rule; in these two provinces, PST is charged based on the total of the selling price plus GST. So if the wind chime above was sold in P.E.I., where the PST is 10 percent, the sale would be calculated as:

1 Wind chime        $39.99
GST @ 5%        2.00
Total        41.99
PST @ 10%        4.20
Total Price        $46.19

Ontario, Nova Scotia, New Brunswick and Newfoundland/Labrador have HST (Harmonized Sales Tax), meaning that the GST and PST have already been combined. In those provinces, you would charge a straight 13 percent on the price of a wind chime (except for in Nova Scotia, where the HST is 15%).

For more on invoicing and applying taxes, see How to Invoice and An Invoice Sample with HST. Both of these articles explain exactly what information has to be on an invoice as well as providing invoice templates you can use.

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