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Legal Guide


The harmonized sales tax (“HST”) combines the 5% GST with a provincial sales tax component. The HST is federally administrated (except in the province of Quebec), and has the same basic operating rules as the GST, with certain exceptions. However, each participating province to the HST regime (referred to as “participating provinces” in the GST legislation), has the ability to decrease or increase the provincial component of the tax.

On April 1, 1997, Nova Scotia, New Brunswick, and Newfoundland and Labrador replaced their existing provincial sales taxes with the HST. The provinces of British Columbia and Ontario did the same effective July 1, 2010. Nevertheless, the province of British Columbia held a referendum and elected to de-harmonize its provincial sales tax from the GST effective April 1, 2013 (accordingly, British Columbia is no longer a participating province). Finally, the province of Prince Edward Island harmonized its provincial sales tax with the GST effective April 1, 2013.

The current list of participating HST provinces includes Ontario, Nova Scotia, Newfoundland and Labrador, New Brunswick and Prince Edward Island.

The HST currently applies at a rate of 13% in Ontario, New Brunswick and Newfoundland and Labrador, 14% in Prince Edward Island and 15% in Nova Scotia. 

All GST registrants who provide taxable supplies to customers in one of these HST provinces, including supplies shipped or mailed from outside these provinces to recipients in one of these provinces, are required to collect and remit the HST. A taxable supply that is not made in a harmonized province continues to be subject to the GST, as are supplies shipped or mailed from any of the HST provinces to  recipients in one of the other provinces.

To determine the province in which a supply is made (and hence the correct rate of tax), it is necessary to review the place of supply rules. These rules provide for both general and specific rules, which depend on the nature of the supply. On February 25, 2010, amendments to existing HST place of supply rules were announced by the federal Department of Finance. The amended place of supply rules also provide expanded rules with respect to the self-assessment and rebates for the provincial component of HST, on property or services brought into a province, or are acquired for consumption, use of supply outside that province, as well as the imported taxable supply rules related to the provincial component of the HST. In June 2012, a revised version of a technical bulletin to assist with the application of these new rules was released.

Registered suppliers who make taxable supplies, including zero-rated supplies, are entitled to recover the HST they pay on their business inputs, through the ITC mechanism. However, in contrast to GST, there are temporary restrictions on the ability of large suppliers (those with annual taxable sales of more than $10 million) and certain financial institutions to claim ITCs, with respect to the provincial component of the HST in Ontario and Prince Edward Island, for energy, telecommunications (other than internet-access and toll-free numbers), certain road vehicles and fuel for same, as well as food, beverages and entertainment. These temporary restrictions are fully in effect for the first five years of the implementation of the HST in Ontario and  Prince Edward Island will be phased out in the subsequent three years.

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