How to Calculate Ontario Sales Tax

What is Ontario Sales Tax?

Ontario sales tax, also known as the Harmonized Sales Tax (HST), is a combined provincial and federal tax applied to most goods and services sold in Ontario. It's a consumption tax that businesses must collect from customers and remit to the government.

The HST replaces the former provincial sales tax and the federal Goods and Services Tax (GST). The current rate is 13%, which includes 5% GST and 8% provincial sales tax.

How to Calculate Ontario Sales Tax

Calculating Ontario sales tax involves determining the taxable amount and applying the current HST rate. Here's the basic formula:

For example, if an item costs $100 before tax, the total price including HST would be:

This means the customer pays $113, with $13 going to the government as tax.

Ontario Sales Tax Rates

The current Ontario sales tax rate is 13%, which includes:

• 5% federal Goods and Services Tax (GST)
• 8% provincial sales tax

This rate applies to most goods and services sold in Ontario. Some specific items may have different tax rates or be exempt from tax.

How to Apply Ontario Sales Tax

Applying Ontario sales tax involves several steps:

1. Determine the pre-tax price of the item or service
2. Calculate the tax amount by multiplying the price by the HST rate (13%)
3. Add the tax amount to the original price to get the total amount
4. Collect the tax from the customer and remit it to the government

For businesses, this process is typically automated through point-of-sale systems that handle tax calculations and reporting.

Ontario Sales Tax Exemptions

Certain goods and services are exempt from Ontario sales tax. These include:

• Basic food and groceries
• Prescription drugs
• Medical devices and supplies
• Certain agricultural products
• Books and newspapers
• Some services provided by non-profit organizations

Businesses must ensure they properly identify and apply exemptions to avoid over-collecting tax.

Common Mistakes to Avoid

When calculating Ontario sales tax, avoid these common errors:

• Applying the wrong tax rate (always use the current 13% HST rate)
• Forgetting to include tax on certain services (like professional services)
• Incorrectly identifying tax-exempt items
• Failing to remit collected taxes to the government
• Not keeping proper records of tax calculations

Using our calculator helps ensure accurate tax calculations and compliance with Ontario tax laws.