How to Calculate a HST in Ontario for Small Businesses | Complete Guide

Harmonized sales tax standards vary based on your company activity. Discover how to calculate hst in Ontario for small businesses from the company accountants at OnDemand International.


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    HST in Ontario

    Have you ever examined your accounting books at the end of the day and thought, “Where did all the money go?” For small business owners in Ontario, a significant portion of that missing money might be Harmonized Sales Tax (HST). Knowing how to calculate HST is essential for correct bookkeeping and completing your tax return. Don’t worry!  In this blog article, we’ll go over everything you need to know about HST in Ontario, from the current rate to how to compute it for your sales. So let’s get started!

    What is an Ontario HST?

    The Ontario Harmonized Sales Tax (HST) is a consumption tax that combines the Ontario Provincial Sales Tax (PST) and the Federal Goods and Services Tax (GST) into one single tax. This tax applies to most goods and services sold or provided in the province of Ontario, Canada.

    The current rate of Ontario HST is 13%. This rate combines the 5% federal GST with the provincial portion of 8%

    How to Calculate a HST in Ontario for Small Businesses?

    After you register your business in Ontario, the CRA will provide you a GST/HST number and a firm Number. You’ll utilize one of these numbers to handle HST duties like collection, reporting, and remittance to the Canada Revenue Agency. HST payments are needed on a yearly basis when you file your business tax returns. Keep your records in order to guarantee compliance and seamless tax operations.

    The following steps to calculate a HST in Ontario for small businesses are as follows:

    Step 1: Determine the HST Rate

    As of the latest update, the HST rate in Ontario is set at 13%. This rate comprises the federal GST portion of 5% and the provincial portion of 8%.

    Step 2: Calculate HST on a Purchase

    To calculate the HST on a purchase, you simply multiply the total taxable amount by the HST rate. For example, if you have a taxable purchase of $100:

    HST = Total Taxable Amount × HST Rate

    = $100 × 13%

    = $13

    So, the HST on a $100 purchase would be $13.

    Step 3: Calculate Total Purchase Cost

    To find the total cost including HST, you add the original purchase amount and the calculated HST. Using the previous example:

    Total Cost = Purchase Amount + HST

    = $100 + $13

    = $113

    Thus, the total cost of the $100 purchase including HST would be $113.

    Step 4: Reverse Calculation (Calculating Pre-Tax Price)

    Conversely, if you have the total cost including HST and want to find the pre-tax price, you can use the following formula:

    Pre-tax Price = Total Cost ÷ (1 + HST Rate)

    For instance, if you want to find the pre-tax price of an item that costs $113 including HST:

    Pre-tax Price = $113 ÷ (1 + 0.13)

    ≈ $100

    This means that the original price of the item before taxes was approximately $100.

    Who is required to pay HST in Ontario?

    The HST applies to taxable supply of property and services made in Canada. Harmonized Sales Tax is paid by customers at the moment of sale. The company is in charge of collecting the HST and sending it to the CRA (Canada Revenue Agency), which then distributes the provincial share to the province’s government.

    What are the several exceptions for paying HST in Ontario?

    The several exceptions for paying HST in Ontario are listed below:

    Small Supplier Exception

    If your company’s total worldwide income from taxable supplies is less than $30,000 in a single calendar quarter and over the previous four calendar quarters, you are excused from registering and charging HST until you reach this amount of income.

    Exempt Supplies

    Several goods and services are excluded from HST, including vital food items, prescription medicines, most healthcare services, and some financial services. Businesses who sell certain exempt supplies do not charge HST on the transactions.

    Zero-Rated Supplies

    Certain products and services are taxable for HST at a 0% rate, which means that businesses must still collect and remit HST at the zero rate. Exports, some agricultural goods, and printed publications are among examples.

    Indigenous Peoples’ Exemptions

    Indigenous peoples could be excluded from paying HST on certain products and services that they purchase or receive on reserve lands.

    Sales From Outside Canada

    Remember that all items imported into Ontario from outside of Canada are subject to HST, whereas goods sold outside of the nation are exempt

    Consult with OnDemand International’s Tax Consultant

    If you want to know more or if you have any query regarding HST in Ontario like how to file it, how to calculate it and so on. Consult with OnDemand International’s Tax Consultant Today!