How to Get Shopify to Calculate Correct Canadian PST, GST, HST, & QST Tax Rates.

Being so close to the British Columbia/Canadian border we work with a lot of Canadian clients with their Shopify and other commerce shopping carts.

In Canada, managing sales taxes for an online store can be complex due to the country’s multi-layered tax system, which includes the Goods and Services Tax (GST), Provincial Sales Tax (PST), Harmonized Sales Tax (HST), and Québec Sales Tax (QST). For Shopify store owners, accurately calculating these taxes is crucial to ensure compliance with tax laws and to provide customers with correct pricing. This technical article guides you through setting up your Shopify store to automatically calculate the correct tax rates for Canadian provinces and territories.

Note – there are additional complexities if you are also trying to accommodate Wholesale orders or have special classes of goods or services that have different thresholds for taxes, duties and exemptions.

Understanding Canadian Sales Taxes

Before configuring your Shopify store, it’s important to understand the different types of sales taxes in Canada:

• GST (Goods and Services Tax): A federal tax applied across Canada at a rate of 5%.
• PST (Provincial Sales Tax): A tax imposed by some provinces on the sale of goods and services. The rate varies by province.
• HST (Harmonized Sales Tax): A combined tax that merges the GST with the PST, applied in certain provinces. The rate varies by province but includes the 5% GST.
• QST (Québec Sales Tax): Specific to Québec, this tax is similar to the PST and is applied in addition to the GST.

Setting Up Taxes in Shopify

To ensure your Shopify store calculates these taxes correctly, follow these steps:

Step 1: Enable Tax Calculations

1. Log in to your Shopify Admin panel.
2. Navigate to Settings > Taxes. This section allows you to configure how taxes are calculated and applied to your products.

Step 2: Set Up Tax Regions

In the Taxes section, you’ll see a list of countries. Since we’re focusing on Canada:

1. Click on Canada to open the tax settings for Canadian provinces and territories.
2. Ensure your business address is correctly set up in the General settings of your Shopify store, as Shopify uses this address to automatically apply the correct tax rates.

Step 3: Configure Provincial and Territorial Taxes

For each province and territory, you need to set the appropriate tax rates:

1. Click on the name of a province or territory to open the tax settings for that location.
2. Enter the correct tax rates for GST, PST, HST, or QST, as applicable. Shopify provides a tax override feature if you need to set specific tax rates for certain products or shipping rates.
3. Repeat this process for each province and territory where you have nexus or a physical presence, as this requires you to collect and remit sales taxes.

Step 4: Apply Tax Overrides (If Necessary)

Shopify allows you to create tax overrides for specific products or shipping rates that might be taxed differently:

1. In the Taxes settings, find the Tax overrides section.
2. Add a product or shipping override by selecting the relevant item and specifying the unique tax rate.

Step 5: Test Your Tax Settings

After setting up your taxes, it’s crucial to test and ensure they are being calculated correctly:

1. Create test orders for various provinces and territories to verify that the correct tax rates are applied.
2. Review the order summaries to see the breakdown of taxes charged.

Understanding How Shopify Handles Canadian Wholesale Rates

Since Canada’s wholesale tax system involves rates varying by province or territory – wholesale transactions complicate this further:

• Different Tax Rates: Wholesale customers may be subject to different tax rates or exemptions, depending on their business status and the nature of the goods being sold.
• Tax Exemptions: Managing tax exemptions for eligible wholesale customers, such as resellers or non-profit organizations, requires careful setup to ensure compliance while avoiding overcharging.

Our recommendation is that you register with all of the provincial tax authorities as a first step and start to create the above structure within your Shopify store, including any exemptions. You can then try to work out any inconsistencies and determine if workarounds are needed.

Keeping Up with Tax Changes

Tax rates and laws can change, so it’s important to stay informed about any updates in Canadian tax regulations. Shopify usually updates tax rates automatically, but it’s good practice to regularly check your settings and adjust them as necessary.

Is this it?

Probably not all of it. Setting up your Shopify store to calculate the correct Canadian PST, GST, HST, and QST tax rates requires a clear understanding of Canada’s tax system and careful configuration of your store’s tax settings. By following the steps outlined above, you can ensure compliance with Canadian tax laws, provide accurate pricing to your customers, and manage your financial obligations effectively. Remember to stay updated on tax regulations and adjust your settings as needed to keep your calculations accurate. While we are Shopify experts, we are certainly not CPAs and Accountants.

We work with Enterprise, Small-business and everyone in-between. If you have complex needs we’re happy to see if there’s a solution for you.