Sales Tax, Commodity Tax, & Other Taxes

Corporate Income Tax

Federal + provincial tax on net business profit. The most familiar tax for business owners — forms the foundation of business tax literacy

HST

• Sales tax charged on most goods and services

• Collected from customers, remitted to CRA.

• Businesses recover HST paid on inputs via Input Tax Credits (ITCs)

• Final consumer bears full economic cost

• Failure to collect or remit correctly exposes the business and directors to significant CRA penalties, compounding interest, and personal liability

Excise Tax

• One-time federal tax on specific goods at manufacture or import:

  • Fuel, tobacco, vaping products, cannabis, certain luxury items, and insurance premiums

• Not charged at every supply chain level

• For businesses that manufacture taxable goods in Canada or import them

Excise Duty

• Federal levy on licensed manufacturers of alcohol (beer, wine, spirits), tobacco, and cannabis

• Applied per unit/litre at the production stage — before the product reaches retailers

  • Paid by licensed producer

• Vary by annual production volume

  • Reduced graduated rates to support the craft brewing industry

Property & Municipal Taxes

• Levied annually by municipalities on real property owned or occupied by the business

• Based on assessed value × mill rate

• Fully deductible as a business expense

  • Claim on T1 (self-employed) or T2 (corporation)

• Commercial/industrial properties are typically taxed at HIGHER rates than residential

Land Transfer & Capital Taxes

• One-time provincial taxes triggered by buyer when property changes hands

• Capital taxes apply to financial institution capital

• Rates vary significantly by province

• First-time home buyer rebates exist in some provinces

  • Personal only; not available for businesses

• Commercial real estate transactions may also attract HST on top of land transfer tax

HST cycle

1. Charge HST on all sales

2. Claim ITCs when buying goods for the business

3. Subtract ITCs from HST collected and remit net amount

   • If ITCs exceed HST collected, CRA refunds the difference

HST Registration

• Must register once axable revenues exceed $30K in a single calendar quarter or in 4 consecutive quarters

• Early registration is smart

• Filed annually (under $1M), quarterly ($1.5M-$6M), or monthly ($6M)

• Non-compliance to remit/register expose business to fees, penalties, and interest

Taxable Supplies

• ITCs claimable

• Seller charges HST to customer on every sale

• Seller claims ITCs on all related business inputs

• Most goods & retail sales, Consulting & accounting, Legal services, Construction, Hotel stays, Restaurant meals

Zero-Rated Supplies

• ITCs still claimable

• Charges 0% HST to customer, but still registered

• Seller still claims ITCs on all business inputs

• Basic groceries (not restaurant), Prescription drugs, Most medical devices, Exports of goods & services, International travel

Exempt Supplies

• No ITCs Allowed

• Charges 0% HST, but cannot claim any ITCs

• HST paid on inputs becomes an unrecoverable cost

• Residential rent (long-term), Most health care services, Child care, Most educational services, Financial services (interest, insurance), Legal aid

Special HST Situations

• Digital Economy & Non-Resident Vendors

  • Companies like Netflix, Spotify, Adobe, and Amazon must collect and remit HST on digital sales to Canada consumers

• Real Property

  • Sales of new residential housing and commercial buildings attract HST

  • Resale of used residential property is generally exempt

• Imported Goods & Services

  • HST is generally payable when goods cross the Canadian border

• What CRA looks for in HST audits

  • Missing invoices for ITC claims, ITCs claimed on personal expenses, Inconsistent revenue between HST returns and T2, Incorrect supply classification (taxable vs. exempt)

Capital Tax (Financial Institutions)

• Most provinces levy a capital tax on financial institutions (banks, insurance companies, credit unions) based on their paid-up capital

• Not generally applicable to small businesses

• Was eliminated federally in 2006, but still exists in some provinces

Employer Health Tax (EHT)

• Payroll-based health tax on employers above a certain payroll threshold

• HAPSET

Carbon Pricing / Fuel Charge

• Federal carbon levy applies to fossil fuels in provinces without an equivalent system.

• NL has own carbon pricing plan

• Affects businesses that heat facilities, operate fleets, or use natural gas in production processes

Luxury Tax (2022)

• Applies to new cars/aircraft over $100K and new boats over $250K

• Affects dealerships, aviation vendors, and high-end marine sellers

Customs Duties (Import Tariffs)

• Businesses importing goods from outside Canada may owe customs duties under the Customs Tariff

• Rates vary by product and country of origin

Non HST provinces (PST)

• In BC, SK, and MB, a separate PST applies alongside federal GST

• PST isn’t recoverable as ITCs, it’s a true cost