Quebec Sales Tax: Rules for Businesses

Businesses operating in Quebec must navigate a dual sales tax system. Companies are responsible for understanding their obligations under both of these regimes. The collection and remittance of these taxes are a standard part of conducting business, requiring adherence to specific rules.

Understanding Quebec’s Sales Tax Framework

The sales tax system in Quebec is composed of two distinct taxes. The first is the federal Goods and Services Tax (GST), which is applied at a rate of 5% on most goods and services sold in Canada. The second is the Quebec Sales Tax (QST), a provincial tax levied at a rate of 9.975%. The QST is calculated on the selling price before the GST is applied, resulting in a combined tax rate of 14.975% for most transactions. Revenu Québec administers both the QST and the GST for businesses.

Supplies of goods and services fall into one of three categories. Taxable supplies include the majority of goods and services, such as electronics, professional services, and restaurant meals, and are subject to both GST and QST. Zero-rated supplies are taxable but at a rate of 0%; examples include basic groceries like milk and bread, prescription drugs, and certain medical devices. Exempt supplies are not subject to GST or QST, and include services like certain healthcare procedures, educational services, and long-term residential rent.

When a business makes taxable or zero-rated supplies, it can claim Input Tax Credits (ITCs) for the GST and Input Tax Refunds (ITRs) for the QST paid on its business expenses. This mechanism allows businesses to recover the sales tax they pay on their operational costs. Conversely, if a business only provides exempt supplies, it cannot register for GST/QST and is unable to recover the taxes paid on its purchases and expenses.

Determining Your Obligation to Register

The “small supplier” rule determines the registration requirement. A business is a small supplier if its total worldwide taxable revenues, including those of its associates, are $30,000 or less in a single calendar quarter or over the last four consecutive calendar quarters. Once a business exceeds this $30,000 threshold, it ceases to be a small supplier and must register for both GST and QST.

The calculation of this revenue threshold includes sales, rentals, and other taxable supplies made worldwide. However, certain types of revenue are excluded from this calculation. These exclusions include the sale of financial services, the sale of goodwill from a business, and the sale of capital property.

Certain business activities mandate registration regardless of the $30,000 revenue threshold. For example, businesses providing taxi or limousine services must register for both GST and QST from their first day of operation. Businesses must register for QST if they engage in the retail sale of tobacco, fuel, or alcoholic beverages. Registration is also required for businesses that sell or lease new tires or certain road vehicles.

How to Register for Sales Tax

Information Needed for Registration

To register, a business must provide the following information:

• A federal Business Number (BN)
• A Québec Enterprise Number (NEQ) if the business is incorporated in the province
• The legal name of the business
• The physical and mailing addresses of the business, along with detailed contact information
• A description of the primary business activities
• The effective date of registration; this is the date the business ceased to be a small supplier

Registration Process

Businesses can register for sales tax online through the “My Account for businesses” portal. A “Register a New Business” service is also available online for companies not yet registered with Revenu Québec. These online services are processed faster than mail-in applications.

Alternatively, a business can register by mail by completing and submitting the required application form. Registration can also be completed over the phone by contacting Revenu Québec’s client services. Once the application is processed, Revenu Québec will issue a GST and QST registration number.

Filing and Remitting Sales Tax

Once registered, a business must file regular sales tax returns. Revenu Québec assigns a reporting period—monthly, quarterly, or annually—based on the business’s total annual taxable sales. Businesses with higher revenues are required to file more frequently.

The filing process is calculating the net tax. This is determined by taking the total GST and QST collected from customers during the reporting period and subtracting the eligible Input Tax Credits (ITCs) and Input Tax Refunds (ITRs) for taxes paid on business expenses. If the collected tax is more than the credits, the difference is the amount that must be remitted to Revenu Québec. If the credits exceed the tax collected, the business is entitled to a refund.

The deadline for filing the return and remitting any amount owing is one month after the end of the reporting period for monthly and quarterly filers. For annual filers, the deadline is three months after the fiscal year-end. Most businesses are required to file their returns electronically through the “My Account for businesses” portal. Payments can be made electronically, by mail, or at a financial institution.