Taxes on Goods and Services
Taxes: What Taxes?
You go to the grocery store to get all the ingredients to cook dinner and fill your pantry. When you get to the checkout, you realize that some items in your cart have taxes added to their price, but not all of them do. Why?
Why Tax Consumers and Businesses?
Taxes are one of the primary sources of revenue for governments. The money is used to fund all government spending, including public services such as health care, education and transportation. Taxes are also used to ensure a redistribution of wealth among the population through various programs. For example, a portion of the excise tax on gasoline is transferred to Quebec municipalities to help them maintain their water and sewer systems.
Excise taxes and duties are imposed by governments on certain goods and services, such as gasoline, alcoholic beverages and tobacco products. Unlike the GST and QST, they do not appear on the receipt since they are included in the price.
Consumption Taxes: GST and QST
Consumption taxes apply when you buy goods, like pants and chocolate bars, or services, like haircuts or having a plumber replace a faucet. There are two levels of tax in Canada: federal and provincial. The federal tax is the Goods and Services Tax (GST) and the provincial tax in Quebec is the Quebec Sales Tax (QST).
Calculating the Amount of GST and QST
In Quebec, the prices advertised in stores or online do not include the taxes. You have to calculate the taxes to know how much you will actually spend on a good or a service. Even though the label says $2.79, the soap in your shopping cart will cost a little more than that. You have to add 5% of its price for the GST and 9.975% for the QST. The final cost of the soap will be $3.21.
See the concept sheet on Calculating Tax and Discounts for ways to calculate the GST and QST.
Zero-rated Goods and Services
Some goods and services are zero-rated, meaning that buyers do not pay GST nor QST when purchasing them. This is one way for governments to make them more affordable for consumers. This is the case for basic food commodities like fruits and vegetables, legumes, bread, meat and fish. But be careful! If the products are in single servings or processed, taxes may apply.
Prescription drugs, health care services and educational services are exempt from taxes too.
Taxed and Zero-Rated Products
A grocery store receipt is a good example of what is taxed and what is not.
Example of a Grocery Store Receipt
he majority of the items in your cart are basic food commodities (onions, canned tomatoes, a bag of rice, bread and butter). No tax is charged on these items when you look at the total on your receipt.
However, taxes will be calculated on the hot roast chicken, because it is a processed product, and on the chocolate bar, because it’s not considered an essential product. Taxes will also be added to the hand soap and paper towels since they are not food products.
The four taxable products cost a total of $15.33. The GST and QST are calculated only on this amount.
GST calculation: 15.33 × 0.05 = 0.77
QST calculation: 15.33 × 0.09975 = 1.53
Total taxes: 0.77 + 1.53 = 2.30
Some merchants identify taxable products on their sales receipts by adding letters to the product line. In the example of the Épicerie fraicheur, the letter F is used to indicate that the GST, the federal tax, must be calculated on the product. The same goes for the letter P, which refers to the provincial tax: QST.
It is important to keep copies of your receipts. Without proof of purchase, it will be difficult to obtain an exchange or refund or to exercise your rights as a consumer.
See the Consumer Rights and Responsibilities concept sheet for more details.
Listed below is a summary of goods and services, categorized by whether they are taxable:
|
Not taxable |
Taxable |
|---|---|
|
Fruits and vegetables |
Alcoholic beverages (beer, wine, etc.) |
|
Meat |
Roast chicken |
|
Bread |
Soft drinks |
|
An assortment of six or more servings of sweet baked goods (tarts, chocolate croissants, etc.) |
Candy (any amount) |
|
Milk |
Strawberry flavoured milk in individual containers |
|
Ice cream container of at least 500 mL or 500 g |
Snack foods (chips, pretzels, popcorn, etc.) (any amount) |
|
Baby food |
Carbonated mineral water |
|
Health care and dental services (doctor, optometrist, dentist, etc.) |
Cosmetic dental services |
|
Feminine hygiene products |
Non-edible products (household products, tissues, deodorants, etc.) |
|
Prescription drugs |
Food purchased in restaurants |
|
Public transportation |
Excise Duty and Tax
By removing tax from certain goods and services, governments make them more affordable for consumers. But they may impose an additional tax or duty on other goods and services to finance programs and specific funds or to discourage consumption. These are called excise taxes or duties.
When you buy a bottle of wine, a can of beer or fill up a car with gas, you pay a duty or excise tax that is included in the advertised price. The amount of GST and QST is added to the price of the product, including the duty or excise tax.
Useful Tools and Links
Exercice
Vidéo
How to Read a Receipt
References
