Sales tax is one of the most critical (and often misunderstood) aspects of running a small business in Canada, especially in Québec, where both federal and provincial tax rules apply. Failing to charge or remit sales tax correctly can lead to costly penalties, audits, or compliance issues.
Whether you’re launching your first business or scaling an existing operation, understanding your obligations for GST/HST (federal) and QST (provincial) is essential. This guide walks you through everything you need to know (from registration and invoicing to filing and automation) so you can stay compliant and focus on growing your business.
Understanding sales tax in Canada and Québec
GST/HST vs. QST: What’s the difference?
In Canada, there are two main sales taxes that may apply:
- GST (Goods and Services Tax): A federal tax of 5% that applies across all provinces.
- HST (Harmonized Sales Tax): A combination of GST and provincial sales tax, used in some provinces (not in Québec).
- QST (Québec Sales Tax): A provincial tax of 9.975% administered separately by Revenu Québec.
Québec is unique because both GST and QST must be charged and collected separately. As a result, small business owners must be aware of two distinct tax accounts and reporting systems.
How sales taxes apply to goods and services in Québec
In Québec, most goods and services are subject to both GST and QST. However, some items are zero-rated (0%) or exempt, such as basic groceries, certain medical devices, or child care services.
Knowing the classification of your product or service is essential, as incorrect tax application can trigger audits or force you to pay back undercharged tax out of pocket.
Determining your sales tax obligations
What is a “small supplier” under Canadian law?
If your business generates less than $30,000 in revenue in the last four consecutive calendar quarters (combined), you are considered a “small supplier” and are not required to register for GST/HST or QST.
However, registration is optional and may be beneficial if you:
- Want to claim input tax credits on business expenses
- Work with larger clients who expect sales tax on invoices
- Want to establish a more professional presence
When registration becomes mandatory (federal and provincial rules)
Once you exceed the $30,000 threshold, registration for both GST/HST and QST becomes mandatory. This applies to:
- Sole proprietors
- Partnerships
- Corporations
- Online sellers and service providers (including freelancers)
In Québec, you must register separately with Revenu Québec, even if you already registered for GST with the CRA.
Registering for GST/HST and QST
How to register with the CRA and Revenu Québec
To register your business:
- For GST/HST:
- Visit the CRA’s “My Business Account” portal
- Provide your business number (BN), legal structure, and estimated revenue
- For QST:
- Register online via Revenu Québec’s “ClicSÉQUR” portal
- You’ll need your NEQ (Québec Enterprise Number) and basic business info
Ensure your accounts are linked to the same legal business name to avoid mismatches during filing.
Understanding your tax numbers and filing accounts
After registration, you will receive:
- A GST/HST number (e.g., 123456789 RT0001)
- A QST number (e.g., 123456789 TQ0001)
Each number corresponds to a separate tax account and must be included on invoices and used for filing returns. Keep these identifiers secure and handy for all CRA and Revenu Québec communications.
Charging and tracking sales tax
Including GST/QST on invoices and receipts
All sales invoices must clearly indicate:
- The price before taxes
- The GST and QST rates applied (e.g., 5% GST, 9.975% QST)
- The total amount payable
- Your GST and QST registration numbers
Setting up your POS and bookkeeping systems properly
To simplify compliance:
- Use POS systems that automatically apply the correct tax rates
- Set up your bookkeeping software (e.g., QuickBooks, Wave, Xero) to track taxes separately
- Ensure invoices and receipts are saved and categorized for audit readiness
Good recordkeeping ensures you can accurately remit taxes and claim ITCs (input tax credits) for eligible purchases.
Filing your tax returns
Filing frequency: monthly, quarterly, or annually
The CRA and Revenu Québec assign your filing frequency based on your revenue:
- Monthly: Over $1.5 million in taxable supplies
- Quarterly: $30,000–$1.5 million
- Annually: Less than $30,000 (voluntary registrants)
You’ll need to report collected tax, claim credits, and remit the net amount owing by the due date. Late filings can result in penalties and interest.
Online filing portals: CRA My Business Account & Revenu Québec services
File online through:
- CRA My Business Account for GST/HST
- Revenu Québec’s ClicSÉQUR for QST
These platforms allow you to:
- File and view returns
- Make payments
- View past filings and notices
Using the online platforms reduces errors, speeds up processing, and provides digital confirmation of submissions.
Staying compliant and avoiding penalties
Common mistakes to avoid (undercharging, late filing)
To avoid trouble with tax authorities, watch out for:
- Undercharging or not charging sales tax
- Missing filing deadlines or late payments
- Failing to track or remit QST separately
- Using incorrect tax rates on invoices
- Not reporting zero-activity periods
Even honest mistakes can lead to fines, audits, or back taxes owed, so consistency is key.
Automating calculations and tracking with accounting software
Using accounting tools like QuickBooks, Xero, or Sage can help:
- Automatically apply the correct tax rates
- Generate reports for filing
- Track input tax credits on purchases
- Set reminders for filing deadlines
Automation helps reduce errors and saves time especially as your business grows or if you offer services in multiple provinces.
Claiming refunds and handling overpayments
Even with careful accounting, businesses occasionally overcharge clients or over-remit sales tax. In Québec, if you’ve collected GST or QST in error or remitted too much, you’re entitled to request a refund or adjustment. The Canada Revenue Agency (CRA) and Revenu Québec both offer mechanisms to file refund requests: typically through an amended return or a separate refund application. Timely action is essential, as there are statutory deadlines (usually within four years) for submitting these claims. Keeping detailed records of the transactions and client communications is crucial to support your request and avoid complications.
Sales tax exemptions: who and what qualifies
Not all products and services are subject to sales tax in Québec. Understanding exemptions can help small businesses avoid overcharging customers and remain compliant. Commonly exempt items include basic groceries, most health and dental services, educational services, and certain legal aid services. Additionally, sales made to Indigenous customers or organizations may also be exempt under specific conditions. Businesses must retain proper documentation (such as exemption certificates or identity verification) to support any non-collection of GST or QST. Misapplying exemptions can lead to audits and potential penalties, so when in doubt, consult Revenu Québec’s exemption list or a tax advisor.
Understanding taxable revenues: what counts and what doesn’t
When determining whether your business has reached the $30,000 threshold for mandatory GST/QST registration, it’s important to understand what qualifies as “taxable revenues.” This includes most sales of goods and services made in Canada, but excludes exempt and zero-rated items. For example, if you operate a daycare or sell prescription eyeglasses, these revenues might not count toward your threshold. Also, passive income like interest or dividends is excluded. Keeping a clear breakdown of taxable versus non-taxable income helps ensure accurate tax assessments and protects against non-compliance.
How to charge hst if you operate outside Québec
While Québec uses the QST system, businesses that operate in multiple provinces (especially those selling online) may need to charge Harmonized Sales Tax (HST) instead of GST/QST in certain regions. HST rates and rules differ by province, and compliance is based on the “place of supply” rules set by the CRA. If your Québec-based business ships to Ontario or Nova Scotia, for instance, HST might apply. In such cases, it’s critical to determine where your customers are located and whether you meet the thresholds that trigger registration in those provinces.
Preparing an accurate sales tax calculation
Proper sales tax calculation is foundational to compliance. For most Québec-based businesses, this means applying 5% GST and 9.975% QST to taxable sales. However, nuances arise with discounts, returns, mixed-use goods, and cross-border transactions. A robust sales system (preferably integrated with accounting software) should calculate taxes dynamically based on product type and buyer location. Businesses must also be cautious when manually calculating sales tax, as rounding errors or tax-exclusive versus tax-inclusive pricing can create discrepancies that accumulate over time.
Filing your hst return when selling interprovincially
If your business sells into HST-participating provinces (e.g., Ontario, New Brunswick), you may be required to file an HST return separate from your Québec filings. While GST and HST are administratively unified through the CRA, your return must accurately differentiate revenue earned in each jurisdiction. This ensures you remit the correct tax amounts and can claim input tax credits where appropriate. Proper configuration of sales channels and invoicing tools helps segment these revenues for accurate filing.
Tools to help small businesses collect sales tax efficiently
Small businesses can benefit greatly from using automated tax collection tools. Many POS systems and e-commerce platforms (like Shopify, Square, and Stripe) offer sales tax modules that apply correct rates based on customer location and product classification. These tools can also generate tax reports, which are indispensable when preparing GST/HST or QST returns. Investing in these systems not only reduces administrative overhead but also builds confidence in your tax compliance practices, particularly as your taxable revenues increase.
Strategic financial planning for long-term growth
Séguin distinguishes itself by offering in-depth strategic financial planning tailored to the unique goals and challenges of each business it serves. Through a consultative approach, Séguin works closely with entrepreneurs and executive teams to create roadmaps that align with both short-term cash flow needs and long-term expansion objectives. Whether it’s scenario forecasting, budgeting cycles, or risk-adjusted investment planning, their strategic insights help businesses make informed decisions that pave the way for sustainable success.
