What Is QST Tax? How Quebec’s Sales Tax Works
Navigate the complexities of Quebec's provincial sales tax. Gain a clear understanding of its structure, application, and compliance requirements.
The Quebec Sales Tax (QST) is a provincial consumption tax applied to most goods and services in Quebec, Canada. It operates as a source of revenue for public services within the province. The QST functions alongside the federal Goods and Services Tax (GST), forming a dual sales tax system. This tax structure ensures that both provincial and federal governments receive tax revenues from transactions occurring within Quebec.
Understanding Quebec Sales Tax
The Quebec Sales Tax (QST) is a provincial value-added tax administered by Revenu Québec. It applies to most goods and services sold or provided within Quebec. Unlike some other Canadian provinces that have harmonized their provincial sales tax with the federal GST into a single Harmonized Sales Tax (HST), Quebec maintains a distinct dual system. Businesses in Quebec generally collect both the 5% federal GST and the 9.975% provincial QST separately from consumers.
As a value-added tax, QST is applied at each stage of the supply chain, from manufacturing to retail. While businesses collect QST at each step, they can recover the QST paid on their business inputs, ensuring the ultimate tax burden is borne by the final consumer. This mechanism prevents “tax on tax” scenarios for businesses.
Revenu Québec manages the QST and, under an agreement with the federal government, also administers the GST within the province. This arrangement means Quebec businesses interact primarily with Revenu Québec for both federal and provincial sales tax matters.
What Transactions Are Taxed
The QST generally applies to the sale of most goods and services, including tangible personal property, many types of services, and intangible personal property. Examples include retail sales, digital products, professional services, accommodations, new residential complexes, commercial building rentals, and telecommunications services.
Some transactions, however, are either “exempt” or “zero-rated” from QST, meaning that QST is not charged to the consumer. The distinction between these two categories is important for businesses, particularly regarding their ability to recover QST paid on related expenses.
Exempt supplies are those on which no QST is charged, and businesses providing these supplies cannot claim input tax refunds (ITRs) for QST paid on expenses related to making those supplies. Common examples of exempt supplies include certain financial services, educational services leading to a certificate or diploma, healthcare, dental services, childcare, and long-term residential rent.
In contrast, zero-rated supplies are also taxed at a 0% rate, so no QST is charged to the consumer. However, businesses providing zero-rated supplies can claim input tax refunds for the QST paid on expenses incurred to produce or sell those supplies. This allows businesses to recover the QST embedded in their costs. Examples of zero-rated supplies include basic groceries, certain medical devices, and most prescription drugs.
How QST is Calculated and Remitted
The current QST rate is 9.975% and is applied to the selling price of goods and services. When calculating the total tax on a sale, the federal GST of 5% is first applied to the selling price, and then the QST is calculated on the selling price excluding the GST. For instance, on a $100 item, the 5% GST would be $5.00, and the 9.975% QST would be $9.98, for a total of $14.98 in sales taxes. Businesses registered for QST are required to charge and collect this tax from their customers.
Businesses generally need to register for a QST account with Revenu Québec if their total worldwide taxable supplies exceed $30,000 in a calendar quarter or over four consecutive calendar quarters. Certain business activities, such as operating a taxi service, require mandatory registration regardless of sales volume. Registration can typically be completed online through Revenu Québec’s website.
Registered businesses can claim “input tax refunds” (ITRs). These ITRs allow businesses to recover the QST they paid on goods and services acquired for use in their commercial activities. For example, a business can claim an ITR for QST paid on office equipment or accounting fees. This recovery mechanism ensures that the tax burden does not compound for businesses throughout the supply chain.
Businesses file QST returns and remit the collected QST, minus any eligible ITRs, to Revenu Québec. The filing frequency, whether monthly, quarterly, or annually, is assigned by Revenu Québec based on the business’s total annual taxable sales. Most registrants claim their ITRs when they file their QST returns for the reporting period in which the purchases were made, typically having up to four years to make a claim. Electronic filing and payment services are available through Revenu Québec’s online portals.