If you plan to sell goods and/or services in Canada, you must verify if your product is taxable, zero-rated or exempt in order to comply with Quebec tax laws.
Taxable products
Taxable products are goods/services to which GST and QST apply in the course of a commercial activity.
The GST rate is 5% and the QST rate is 9.975% (in Quebec).
Businesses registered for GST and QST, whose products are taxable, may be entitled to a refund of taxes on purchases related to the business activities, ITCs and ITRs.
Examples include :
the sale of tools to a small engine repair business and the sale of lawnmowers by that business
the sale of moulds to a bakery and the sale of chocolates by that bakery
the sale of a computer to a law firm and the provision of legal services by that firm;
the sale of new residential buildings;
the sale and rental of commercial real estate;
the retail sale and lease of automobiles;
the sale of gasoline and the provision of an automobile repair service
the sale of soft drinks, candy and chips
the sale of clothing and footwear;
the rental of a room for one night in a hotel
the provision of a hairdressing service;
the sale of printed books that have an International Standard Book Number (ISBN) for GST purposes.
Zero-rated goods
Zero-rated goods are taxable at 0% under both the GST and the QST. Therefore, you do not have to collect taxes on this type of product.
However, you may be entitled to an ITC and ITR input rebate for taxable goods/services paid for in the operation of your business.
If you acquire a zero-rated good or service, you cannot claim an ITC or ITR on it because you did not pay GST or QST on it.
Examples include :
the sale of certain prescription drugs
the sale of certain medical devices
the sale of basic groceries;
the sale of certain goods used in agriculture and fishing
the sale of certain products marketed exclusively for feminine hygiene;
the sale of certain articles intended for breastfeeding, under the QST regime;
the sale of children's diapers or panties and certain accessories, under the QST system;
the sale of certain goods or services shipped outside Canada or Quebec, under the QST system (for more information, see the Exports subsection);
the provision of certain passengers or freight transportation services;
the sale of printed books that have an International Standard Book Number (ISBN) for QST purposes.
Exempt products
GST and QST do not apply. Therefore, you do not have to collect or pay taxes on this type of supply.
In addition, you are not entitled to ITC and ITR input tax refunds on taxable purchases made for the purpose of marketing exempt products.
Examples include :
the sale of most residential real property that is not new
the rental of a residential unit for a period of one month or more
the provision of most health, educational, childcare and legal services
the provision of certain services by public sector organizations (e.g., governments and public service bodies)
the provision of most financial services.
For more information, visit the Revenu Québec website. You can also contact us by making an appointment for a consultation with one of our CPAs.