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How to Calculate Sales Tax in Ontario

Reviewed by Calculator Editorial Team

Calculating sales tax in Ontario is essential for businesses and individuals to ensure compliance with provincial tax laws. This guide explains the Ontario Harmonized Sales Tax (HST) system, how to calculate it, and key considerations when applying sales tax.

What is Ontario Sales Tax?

Ontario uses the Harmonized Sales Tax (HST) system, which combines the provincial sales tax and the federal Goods and Services Tax (GST) into a single tax rate. The HST is applied to most goods and services sold in Ontario.

The HST rate in Ontario is currently 13%. This rate applies to most taxable supplies, including goods and services sold to consumers and businesses. The HST is collected by retailers and remitted to the government, with the provincial portion going to the Ontario government and the federal portion going to the federal government.

Note: Some goods and services are exempt from HST, such as basic groceries, prescription drugs, and certain medical supplies. These exemptions are managed by the Canada Revenue Agency (CRA).

How to Calculate Sales Tax

Calculating sales tax in Ontario involves determining the HST amount based on the product or service price. The formula for calculating HST is straightforward:

HST Amount = Price × HST Rate

Where:

  • Price is the cost of the product or service before tax.
  • HST Rate is the current HST rate in Ontario (13%).

For example, if you purchase a product priced at $100, the HST amount would be:

HST Amount = $100 × 13% = $13

The total amount to be paid, including HST, is the sum of the product price and the HST amount.

Ontario HST Rates

The HST rate in Ontario is 13%. This rate applies to most goods and services, including:

  • Retail goods
  • Services provided by businesses
  • Certain digital products and services

Some goods and services are exempt from HST, such as:

  • Basic groceries
  • Prescription drugs
  • Certain medical supplies
  • Books and newspapers

The CRA provides a comprehensive list of HST exemptions and zero-rated supplies. Businesses and individuals should refer to the CRA website for the most up-to-date information.

Sales Tax Exemptions

Not all goods and services are subject to HST in Ontario. The following items are exempt from HST:

  • Basic groceries: Food and non-perishable household items.
  • Prescription drugs: Medicines prescribed by a doctor.
  • Certain medical supplies: Medical devices and equipment.
  • Books and newspapers: Printed publications.
  • Environmentally friendly products: Certain products that meet specific environmental standards.

Businesses and individuals should ensure they are aware of the HST exemptions to avoid unintentional tax liabilities. The CRA provides detailed guidelines on HST exemptions.

How to Apply Sales Tax

Applying sales tax in Ontario involves several steps, depending on whether you are a consumer or a business:

For Consumers

  1. Identify the price: Determine the price of the product or service before tax.
  2. Calculate HST: Multiply the price by the HST rate (13%).
  3. Add HST to the price: The total amount to be paid is the sum of the price and the HST amount.
  4. Pay the total amount: Ensure you pay the total amount including HST.

For Businesses

  1. Determine the taxable amount: Identify the price of the goods or services sold.
  2. Calculate HST: Multiply the taxable amount by the HST rate (13%).
  3. Issue an invoice: Include the HST amount on the invoice.
  4. Remit HST to the government: Submit the HST amount to the CRA.

Businesses must also keep accurate records of HST transactions and file HST returns with the CRA.

Common Mistakes to Avoid

When calculating and applying sales tax in Ontario, there are several common mistakes to avoid:

  • Incorrect HST rate: Ensure you are using the correct HST rate of 13%.
  • Missing exemptions: Be aware of HST exemptions and ensure they are correctly applied.
  • Incorrect calculations: Double-check your calculations to avoid errors.
  • Failure to remit HST: Businesses must remit HST to the CRA on time.

By following the correct procedures and staying informed about HST requirements, you can ensure compliance with Ontario's sales tax laws.

Frequently Asked Questions

What is the current HST rate in Ontario?
The current HST rate in Ontario is 13%. This rate applies to most goods and services sold in the province.
What goods and services are exempt from HST in Ontario?
Basic groceries, prescription drugs, certain medical supplies, books, and newspapers are exempt from HST in Ontario. The CRA provides a comprehensive list of HST exemptions.
How do I calculate HST on a product or service?
To calculate HST, multiply the price of the product or service by the HST rate (13%). The result is the HST amount, which should be added to the price to get the total amount to be paid.
What should I do if I make a mistake in calculating HST?
If you make a mistake in calculating HST, double-check your calculations and ensure you are using the correct HST rate. If you are a business, you may need to correct your records and remit the correct HST amount to the CRA.