The tax regime in Canada works rather differently from U.S. taxation, so if you do business there you'll need to understand how it works. Through most of the country, you'll see references to the GST and PST, and the HST, which combines the two. In the majority-French province of Quebec, those same taxes are referred to as the TPS and TVQ simply because the phrase underlying each acronym is French rather than English.
A Quick Summary of Canadian Sales Taxes
Canada's federal sales tax is called the Goods and Services Tax, or GST. Like the value-added tax used in the European Union, it's a broad tax covering almost every service or product that's sold anywhere within the country. Every province, like the corresponding American states, has the right to set its own sales taxes as well. In some provinces, that's referred to as the PST, or Provincial Sales Tax. Many provinces harmonize their sales taxes with the federal GST, resulting in the single-line Harmonized Sales Tax, or HST, at the point of sale.
Quebec's TPS and TVQ Sales Taxes
The province of Quebec follows a provincial sales tax model rather than the HST model, so there are two separate taxes to monitor. Here, the GST is la taxe sur les produits et services, or TPS, while the provincial sales tax is la taxe de vente du Quebec, or TVQ. If your accounting software is already set up to refer to Canadian taxes such as the GST, PST and HST, it should be a relatively small tweak to add the Francophone acronyms for Quebec taxes.
Current Quebec Tax Rates
As of early 2019, the rate for the federal GST/TPS is 5 percent. The TVQ tax is 9.975 percent, giving a combined tax burden of 14.975 percent for business transacted within the province. If you're selling a product into Quebec at wholesale, you'll need to add on just the 5 percent federal tax. If you're selling directly to end users, you'll need to add both the 5 percent GST/TPS and the provincial TVQ.
Doing the Math
Assume, for the sake of simple math, that you're selling your product for an even $100 Canadian. The TPS on that sale would be $5, and the TVQ would be $9.98 – it gets rounded to the nearest cent – giving a total of $114.98. This should show on your receipt in French as the prix avec taxes. Although your receipts will usually show the dollar amounts of the sale and the resulting taxes separately, Quebec law states that the actual tax percentages shouldn't be printed out. You may also pay an all-in price occasionally that doesn't break out the amount of the taxes. That's how gasoline is sold, for example.
The Reverse Calculation
This means you'll occasionally have to account for the taxes you've incurred for a purchase by backing out the 9.975 percent TVQ and the 5 percent TPS. To do that, you'd divide the tax rate by 100 and add 1, then divide your selling price by that number. For the TPS/TVQ, dividing 100 by their combined 14.975 percent gives a result of 6.678. Adding one gives us 7.678, and our selling price of $114.98 divided by 7.678 gives us a tax amount of $14.975, which rounds to $14.98 and gives us our before-tax price of $100.
Save Time With an Online Calculator
That's the kind of calculation only an accountant could love, but you'll seldom have to do it manually. Your accounting software will do that for you, ordinarily. If you're in the field and have to work out the numbers for yourself, it's simplest to use one of the many online sales tax calculators. If you're looking for one that's specifically Quebec-oriented, you can try the French search terms "calcul taxes" or "taxes QC," and then use automatic translation to decipher any instructions that aren't immediately clear.
Allow for Rounding
You may sometimes find that your dollar amounts are off by a few cents here and there, which can be maddening if you're a stickler for accuracy. There are two reasons for that. One is that Canada doesn't use the penny anymore, so cash purchases are rounded up or down to the nearest cent. Also, the TVQ tax uses three places after the decimal point, and some cash registers only utilize two decimal places. In that instance, retailers round the entire dollar amount before tax to the nearest cent before applying taxes. The logic isn't hard to follow once you're aware of it.
Remittances and Refunds
Like the European VAT, the Canadian GST is a tax that only comes out of your pocket if you're the end purchaser. Otherwise, you'll collect the GST/TPS and then remit it to Revenue Canada. Likewise, if you're selling to end users, you'll collect the TVQ and remit it to Revenu Quebec. You must register with each level of government to collect those taxes before you can do business there and remit the appropriate dollar amounts at set intervals – usually quarterly – to the respective governments.
The good news is that you'll also get refunds. The GST/TPS you pay on any item you've purchased and resold comes back to you as a refund from Revenue Canada after you've filed the correct paperwork. If you're in Quebec on business, you should also save your receipts for things like lodging and gasoline purchases. When you pass through customs on your way home, you'll be able to fill out a form and claim back the 5 percent GST you've paid on your purchases while in Canada.
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