How to Calculate Canadian Sales Tax

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Calculate Canadian sales tax.
Calculate Canadian sales tax. (Image: canada flag banner image by A74.FR Ben Fontaine from Fotolia.com)

Most Canadians pay both federal and provincial sales taxes on goods and services. The federal sales tax is 5 percent across the board; the provincial sales tax varies by province and the type of good you purchase. Many Canadian provinces add the federal and provincial taxes to create one rate called the Harmonized Sales Tax (HST).

Sometimes merchants include the tax in the selling price and sometimes they do not. There are two ways to calculate sales tax depending how a merchant prices goods. Knowing how to calculate Canadian sales tax is useful when comparing costs in different provinces.

Computing Tax When It Is Not Included in the Price

Look up the HST for your province and the type of item you are purchasing. You can find current HST rates on the provincial governments' websites. If you are in a province that does not use HST, add 5 percent to the provincial rate to find the total tax rate. If there is no provincial tax, then the tax rate is simply 5 percent.

Express the tax rate as a decimal. For example, if the total tax rate is 12 percent, use the number 0.12.

Multiply the price of the item by the number you obtained in Step 2. This is the Canadian sales tax. For example, if an item costs $150 and the tax rate is 0.12, then the total sales tax is ($150)(0.12) = $18.

Computing Tax When It Is Included in the Price

Express the total tax rate as a decimal and add 1. For example, if the total tax is 12 percent, you would compute 0.12 + 1 = 1.12.

Divide the selling price of the item by the number you computed in Step 1. This is the base price of the item, the price before taxes. For example, if a store marks an item at $280, then the base price is $280/1.12 = $250.

Subtract the base price from the selling price to calculate the Canadian sales tax. For example, if the selling price is $280 and the base price is $250, then the tax is $30.

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