If you plan on visiting Canada, when you get the check at the end of a meal or when you get your hotel bill at the end of your stay, the taxes may shock you, especially if you are an American.
Canada adds at least one sales tax onto purchases made within the country and in some provinces, you may get an additional tax that can add as much as 15 percent to your total bill. The only thing you do not have to pay tax on is groceries. However, if you go out for a meal in a restaurant, the food and service are taxed. If you look at a list of the top 10 cities to visit in Canada, you will note that most of them have higher taxes.
The good news is that Canada no longer has a value-added tax rebate (VAT) for goods purchased in Canada. The VAT was eliminated in 2007.
Several Types of Sales Taxes
There are three types of sales taxes that may apply to you, it all depends on where in Canada you are. There is the goods and services tax, provincial sales tax, and the harmonized sales tax. Learn a little about each one. Some provinces and territories may have one of these, and some may have a combination of these taxes.
Goods and Services Tax
The goods and services tax is a value-added tax that is levied by the federal government. That rate is set nationally at 5 percent. No matter where in Canada you are, you will have to pay at least 5 percent for a good or service.
There are four areas that only pay 5 percent sales tax: Alberta, Northwest Territories, Yukon, and Nunavut. These areas do not have additionals taxes on top of that.
Provincial Sales Tax
The provincial sales tax is a value-added tax that is levied by some provinces, including British Columbia, Saskatchewan, Manitoba, and Quebec. This tax rate varies based on the province that you are in. The following provincial sales tax rates are British Columbia (7 percent), Saskatchewan (6 percent), Manitoba (8 percent), and Quebec (9.975 percent). Each of these sales taxes is charged in addition to the federal goods and services tax (5 percent).
Harmonized Sales Tax
The Harmonized Sales Tax is a value-added tax that blends the federal government's goods and services tax (5 percent) with a provincial sales tax into one rate. This appears as one tax on your restaurant, hotel and store bills. This sales tax system is used in Ontario, as well as the four Atlantic provinces of New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. Ontario's sales tax rate blends to be 13 percent and the four remaining Atlantic provinces blend to an even 15 percent rate.
Tax Chart by Province
For the most part, the northernmost provinces and territories have the lowest tax rates primarily due to the high cost of living there.
|Province or Territory||Total Tax Rate|
|British Columbia||12 percent|
|New Brunswick||15 percent|
|Newfoundland and Labrador||15 percent|
|Northwest Territories||5 percent|
|Nova Scotia||15 percent|
|Prince Edward Island||15 percent|