Selling products or services across provincial borders can present unique challenges for businesses in Ontario. One common question that arises is which sales tax to charge when selling out of province. In this blog post, we will delve into the complexities of cross-border sales and provide clarity on the sales tax regulations businesses need to adhere to. Understanding the correct sales tax to charge is crucial to ensure compliance and avoid potential penalties. Let’s explore the topic in detail.

1. The Basics of Sales Tax in Ontario: In Ontario, the two main types of sales tax are the Goods and Services Tax (GST) and the Harmonized Sales Tax (HST). The HST combines the federal GST with the provincial sales tax (PST) into a single tax. The HST is applicable in Ontario, New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island. Other provinces have their own separate sales tax regimes.
2. General Rule for Out-of-Province Sales: The general rule for determining which sales tax to charge when selling out of province is based on the destination of the goods or services. If the destination of the goods or services is in a province that has its own separate sales tax, the seller must charge the applicable sales tax of that province.
3. The Place of Supply Rules: To determine the destination of the goods or services, businesses need to follow the place of supply rules set by the Canada Revenue Agency (CRA). These rules specify how to determine the location where a supply is made for tax purposes. The place of supply rules may vary depending on the nature of the transaction, such as the sale of goods, services, or digital products.
4. Selling to Customers in HST-Participating Provinces: When selling to customers in HST-participating provinces (Ontario, New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island), businesses must charge the HST rate applicable in the customer’s province. The current HST rate in Ontario is 13%.
5. Selling to Customers in Non-HST Participating Provinces: For sales to customers in non-HST participating provinces, businesses need to charge the GST rate of 5% regardless of the province. However, some provinces have additional provincial sales taxes that businesses may need to consider when selling to customers in those jurisdictions.
6. Selling to Customers Outside of Canada: When selling to customers outside of Canada, such as international customers, different rules apply. Generally, these sales are considered exports and are exempt from Canadian sales tax. However, businesses need to keep documentation and evidence to support the export status of the goods or services.
7. Compliance and Record Keeping: Compliance with sales tax regulations is crucial for businesses. It is important to maintain accurate records, including invoices, receipts, and supporting documentation for sales made out of province. These records will be essential for tax reporting and audits.
8. Seeking Professional Advice: Navigating the complexities of cross-border sales tax can be challenging. It is advisable to consult with a tax professional or accountant who is knowledgeable about sales tax regulations. They can provide guidance tailored to your specific business and help ensure compliance with the applicable tax laws.

Conclusion: Determining the correct sales tax to charge when selling out of province in Ontario requires an understanding of the destination of the goods or services and the applicable sales tax rules. By following the place of supply rules and staying up-to-date with the sales tax rates of different provinces, businesses can ensure compliance and avoid potential penalties. Seeking professional advice from a tax professional or accountant is recommended to navigate the complexities of cross-border sales tax effectively. Stay informed, maintain accurate records, and comply with the regulations to operate your business smoothly in the ever-changing landscape of sales tax in Canada.