Canada Goods Service Tax: 2026 GST/HST Guide for US Sellers

• 14 min read

If you sell products to customers in Canada, understanding the country’s tax system is just as important as finding the best shipping rates. Canada’s primary sales tax is the goods service tax (GST), a value added tax that can affect your pricing, compliance, and bottom line. Navigating it might seem complex at first, but it’s manageable once you know the key terms and rules.

This guide breaks down everything a US based seller needs to know about the Canadian goods service tax system, from registration thresholds to import rules. Getting this right helps you provide a smooth experience for your Canadian customers and stay compliant as your business grows. While you focus on the tax details, you can use a tool like an Online Shipping Calculator to easily compare carrier costs and keep your shipping affordable. If you’re new to cross‑border postage, start with our shipping to Canada from the US guide.

The Basics of Canada’s Goods Service Tax System

What is GST/HST? An Overview

The Goods Service Tax (GST) is a 5% federal tax applied to the sale of most goods and services across Canada. Think of it like a national sales tax. It was introduced in 1991 and is a value added tax, which means it’s collected at each stage of the supply chain, but businesses can generally recover the tax they pay on their own expenses.

In some provinces, the federal GST is combined with a provincial sales tax to create the Harmonized Sales Tax (HST). These “participating provinces” have a single, blended tax rate instead of two separate ones. This makes things simpler at the checkout but means the tax rate is higher in those regions.

What are the GST/HST Rates?

The tax rate you need to charge depends entirely on where your customer is located in Canada, not where you are shipping from. This is a critical rule for e-commerce sellers.

  • Federal GST Rate: 5%. This applies in Alberta, British Columbia, Manitoba, Quebec, Saskatchewan, Yukon, Northwest Territories, and Nunavut. (Some of these provinces have a separate Provincial Sales Tax, or PST, that may also apply).
  • Combined HST Rates:
    • 13% in Ontario.
    • 15% in New Brunswick, Newfoundland and Labrador, and Prince Edward Island.
    • 15% in Nova Scotia.

For example, if you ship an order from California to a customer in Toronto, Ontario, you must charge the 13% HST rate. If you ship to Calgary, Alberta, you only charge the 5% GST. To help control your total landed cost, see our guide to finding the cheapest international shipping.

What is a GST/HST Exemption?

Certain goods and services are exempt from the goods service tax. This means no GST or HST is charged on the sale. However, a business that only sells exempt supplies cannot claim back the GST/HST they pay on their business expenses (these are called Input Tax Credits).

Common exempt supplies include:

  • Most health, medical, and dental services.
  • Long term residential rent.
  • Most educational services.
  • Many services provided by financial institutions, like bank fees or loan interest.

What is a Zero-Rated Supply?

Zero-rated supplies are goods and services that are taxable, but the tax rate is 0%. From a customer’s perspective, this looks the same as an exempt item (no tax is paid). But for the business, there’s a huge difference: a business selling zero-rated items can still claim Input Tax Credits to recover the GST/HST they paid on their expenses.

This is a major advantage. Common zero-rated supplies include:

  • Basic groceries like milk, bread, and vegetables.
  • Prescription drugs.
  • Certain medical devices.
  • Feminine hygiene products.
  • Goods and services exported from Canada.

Getting Started with GST/HST Registration

Do I Need to Register for GST/HST?

Whether you need to register for a Canadian goods service tax account depends on your sales volume. This is determined by the small supplier threshold. For most businesses, this threshold is $30,000 CAD in worldwide taxable sales over any four consecutive calendar quarters.

If your sales to Canadian customers are below this amount, you are a “small supplier” and you do not have to register for, collect, or remit GST/HST. If you exceed the $30,000 threshold, you must register.

A few businesses, like taxi and ride-sharing services, must register from their very first sale, regardless of the threshold.

GST/HST Registration for Non-Residents

The rules for non-resident businesses, including US based sellers, are similar. You generally must register for GST/HST if you are “carrying on business in Canada” and your taxable sales to Canadian customers exceed the $30,000 CAD threshold.

What does “carrying on business in Canada” mean? The Canada Revenue Agency (CRA) considers several factors, but a major one is storing inventory in Canada. If you use a Canadian fulfillment center (like Amazon FBA) or a third party logistics (3PL) provider to store goods in Canada, you are almost certainly considered to be carrying on business and must register for GST/HST once you cross the threshold. This requirement for sellers who store inventory in Canada is a key part of the goods service tax framework.

Since July 1, 2021, new rules also require many foreign digital service providers and e-commerce platforms to register and collect tax, even without a physical presence.

What if I Store Inventory in Canada?

As mentioned, holding inventory in a Canadian warehouse is a significant trigger for GST/HST obligations. It creates a “nexus” that requires you to engage with the Canadian tax system.

  • Registration is Likely Required: Once your annual sales to Canadians top $30,000 CAD, you must register.
  • Benefits of Registering: Once registered, you can claim Input Tax Credits to recover the 5% GST you pay on goods when you import them into Canada. This makes the tax neutral for your business.
  • Platform Obligations: If you sell through a marketplace like Amazon, the platform may be required to collect and remit the tax on your behalf. However, you should confirm your specific obligations, as you may still need to register for direct sales or to recover import taxes.

For many US sellers, staying under the $30,000 threshold is a good way to test the Canadian market without dealing with tax compliance. During this phase, you can focus on optimizing your shipping strategy. A good first step is to compare shipping rates to Canada to understand your landed costs and keep prices competitive, and to review how to ship internationally.

How the Goods Service Tax Works in Practice

How Do Input Tax Credits (ITCs) Work?

The Input Tax Credit (ITC) is the core mechanism that makes GST/HST a value added tax. As a registered business, you can claim a credit for the GST/HST you pay on your legitimate business expenses.

Here’s a simple example:

  1. You collect $1,000 in GST/HST from your Canadian customers in a reporting period.
  2. During that same period, you paid $400 in GST/HST on business expenses (like inventory you imported, shipping supplies, and marketing services).
  3. You can claim that $400 as an ITC.
  4. When you file your return, you remit the difference to the government: $1,000 (collected) minus $400 (ITCs) = $600.

This ensures the tax is ultimately paid by the end consumer, not by the businesses along the way. If your ITCs are more than the tax you collected, you get a refund.

What are the GST/HST Return Requirements?

All businesses registered for the goods service tax must file regular returns with the CRA. The filing frequency depends on your annual revenue:

  • Annually: For businesses with sales up to $1.5 million.
  • Quarterly: For sales between $1.5 million and $6 million.
  • Monthly: For sales over $6 million.

You must file a return even if you had no sales or tax to report for the period (this is called a “nil return”). As of 2024, most businesses are required to file their returns electronically. Deadlines are strict, and failing to file on time can lead to penalties.

What are the Place of Supply Rules?

The place of supply rules determine which province’s tax rate applies to a sale. For e-commerce sellers shipping goods, the rule is simple: the tax rate is based on the shipping destination.

  • You ship to a customer in Ontario (an HST province): You charge 13% HST.
  • You ship to a customer in Alberta (a GST only province): You charge 5% GST.

Your business location doesn’t matter. Correctly applying these rules is essential for compliance. When using USPS services, USPS Flat Rate boxes can be cost‑effective for Canadian addresses in certain weight ranges.

Cross Border Transactions and Imports

How is GST/HST Applied to Imported Goods?

When goods are imported into Canada, the Canada Border Services Agency (CBSA) collects the 5% GST at the border. This tax is calculated on the value of the goods in Canadian dollars, plus any applicable customs duties.

If you are the importer of record and are registered for GST/HST, you can claim this 5% import GST back as an Input Tax Credit. For your customers (if they are the importer), this tax is often collected by the shipping carrier upon delivery, sometimes with a brokerage fee. To reduce delays, double‑check that your shipping label and customs forms are complete.

How is GST/HST Applied to Imported Services and Intangibles?

For services and digital products (intangibles), there is no physical border crossing to collect tax. Under certain conditions, the Canadian customer may be required to “self assess” and remit the GST/HST directly to the government.

However, since 2021, new rules require many foreign vendors of digital services (like streaming platforms and software as a service) to register for and collect GST/HST directly from Canadian consumers. This levels the playing field with Canadian companies.

Importing into an HST Province

What happens when goods are imported into an HST province like Ontario or Nova Scotia?

  • For Consumers: CBSA will usually collect the full HST rate at the border on personal importations.
  • For Businesses: CBSA typically only collects the 5% federal GST part. The business may then need to self assess the provincial part of the HST if the goods are not being used exclusively for their commercial activities. However, if the goods are for 100% use in commercial activities, there is generally no need to self assess the provincial portion.

Are Any Imports Non-Taxable?

Yes, certain imports are non-taxable and can enter Canada without GST/HST being applied at the border. Common examples include:

  • Gifts from friends or family valued at $60 CAD or less.
  • Goods brought in by travelers under their personal exemption limits.
  • Warranty replacement parts sent at no charge.

Exporting Goods and Services from Canada

If a Canadian business is exporting, the rules are favorable.

  • Exported Goods: The sale of goods shipped from Canada to a foreign customer is zero-rated. The Canadian seller charges 0% GST/HST.
  • Exported Services: Many services provided to a non-resident are also zero-rated, though the rules are more complex and have exceptions (for example, a service related to real estate located in Canada is taxable).

This zero-rating policy ensures that Canadian tax is not applied to goods and services consumed outside the country, keeping Canadian exports competitive.

Special Rules and Programs

The Drop Shipment Rule

The drop shipment rule is a provision that helps non-resident companies sell to Canadian customers without having to register for GST/HST in some specific scenarios. It typically involves three parties: a non-resident seller (who is not registered), a Canadian supplier (the drop shipper), and a Canadian customer (who is registered).

Under this rule, the Canadian supplier can sell goods to the non-resident without charging GST/HST, provided the goods are shipped directly to the registered Canadian customer who provides a special certificate. This avoids a layer of tax in the supply chain.

Provincial HST Recovery

For businesses, recovering the HST paid on expenses is straightforward. You claim the full amount (both the federal and provincial parts) as an Input Tax Credit.

In the past, there were temporary rules in some provinces that restricted large businesses from recovering the provincial part of the HST on certain expenses. These “Recaptured Input Tax Credit” (RITC) rules have since been phased out for most businesses, so today, nearly all GST/HST registrants can claim a full ITC on the HST they pay.

GST/HST Rebates and Relief Programs

The government offers several rebate and relief programs that refund GST/HST in specific situations. These are different from ITCs because they are often available to non-registrants and consumers. Key programs include:

  • New Housing Rebate: Buyers of new homes can get a rebate for a portion of the GST/HST paid.
  • Public Service Bodies’ (PSB) Rebate: Charities, non-profits, and municipalities can recover a large percentage of the goods service tax they pay.
  • Foreign Convention and Tour Incentive Program: Provides rebates to non-resident convention organizers and on certain tour packages to make Canada an attractive destination.

These programs are designed to support specific policy goals, such as housing affordability and tourism.

Final Thoughts

Navigating Canada’s goods service tax system is a key part of successfully selling to the Canadian market. By understanding the basics of GST versus HST, the $30,000 registration threshold, and how to handle taxes on imported goods, you can stay compliant and build a strong relationship with your Canadian customers.

Remember that managing taxes and shipping costs go hand in hand. Efficiently handling your logistics is crucial, especially when you’re just starting out. Using a free tool like the Online Shipping Calculator can help you model your landed costs and calculate shipping costs accurately, ensuring your business remains profitable as it expands into Canada. Also, set expectations for cross‑border orders by creating a return policy your Canadian customers can easily understand.

Frequently Asked Questions About Goods Service Tax

1. Do I need to charge goods service tax if I sell under $30,000 to Canada?
No. If your worldwide taxable sales (including sales to Canadian customers) are $30,000 CAD or less in a one year period, you qualify as a small supplier and are not required to register for or collect GST/HST.

2. What is the difference between GST and HST?
GST (Goods and Services Tax) is the 5% federal sales tax. HST (Harmonized Sales Tax) is a combined tax used in some provinces that blends the 5% GST with a provincial sales tax into a single rate (either 13% or 15%). You charge the rate of the province you are shipping to.

3. If I store inventory in a Canadian warehouse, do I have to register for GST/HST?
Yes, most likely. Storing inventory in Canada is considered “carrying on business” there. This means you must register for GST/HST as soon as your sales to Canadian customers exceed $30,000 CAD per year.

4. How do I find the correct GST/HST rate for each province?
The rate is based on the customer’s shipping address. You can find the current rates on the Canada Revenue Agency website. Generally, it’s 5% GST for non-participating provinces and 13% or 15% HST for participating provinces like Ontario and the Atlantic provinces.

5. Can I get back the GST I pay on goods I import into Canada?
Yes. If you are registered for GST/HST, the 5% GST you pay to the Canada Border Services Agency (CBSA) upon importation can be fully recovered as an Input Tax Credit (ITC) on your next GST/HST return.

6. What’s the difference between a zero-rated supply and an exempt supply?
Both are sold to the customer with no tax added. However, a business selling zero-rated supplies (like basic groceries or exports) can claim ITCs to recover the GST/HST paid on their expenses. A business selling exempt supplies (like long term rent) cannot claim ITCs.