Sales tax is one of those topics most business owners would rather not think about. But getting it wrong can be costly: undercharge and you pay the difference out of your own margin; overcharge and you risk unhappy customers and compliance problems. For Ontario merchants selling both online and in person, the rules get more involved because customers can be anywhere in Canada or beyond.
This guide explains the fundamentals of GST/HST for Ontario businesses and how to configure Shopify and Shopify POS to handle them. It is educational, not tax advice. Tax rules change and every business is different, so work with a qualified accountant, especially when you first set up or expand into new markets.
The basics: GST, HST, and PST
Canada has a layered sales tax system:
- GST (Goods and Services Tax) is a 5% federal tax that applies across Canada.
- HST (Harmonized Sales Tax) combines GST with a provincial portion in participating provinces. Ontario's HST rate is 13%: 5% federal plus 8% provincial.
- PST (Provincial Sales Tax) is a separate provincial tax in some provinces that don't participate in HST, such as British Columbia, Saskatchewan, and Manitoba. Quebec has its own system, the QST.
Several Atlantic provinces also use HST at their own rates, and those rates can change. Nova Scotia, for example, lowered its HST rate in 2025. This is a good reminder to rely on up-to-date tax tables rather than memory.
Do you need to register?
Generally, businesses must register for GST/HST once their worldwide taxable sales exceed $30,000 over four consecutive calendar quarters (or in a single quarter). Businesses under that threshold are considered "small suppliers" and don't have to register, although many choose to register voluntarily so they can claim input tax credits on business expenses.
Once registered, you must:
- Charge GST/HST on taxable sales
- Display your registration number on receipts and invoices where required
- File returns and remit tax collected, minus eligible input tax credits
- Keep records to support your filings
Talk to your accountant about the right filing frequency and whether voluntary registration makes sense for you.
How HST works for in-store sales
In-store sales are the simplest case. When a customer buys something at your Toronto shop, the sale happens in Ontario, so you charge 13% HST on taxable goods.
Ontario point-of-sale relief
Ontario provides point-of-sale relief of the 8% provincial portion of HST on certain items, meaning customers pay only the 5% federal portion. Categories that have historically qualified include:
- Children's clothing and footwear (with size-based criteria)
- Children's car seats and booster seats
- Diapers
- Books (including audio books), and certain newspapers
- Prepared food and beverages sold for a total of $4 or less
There are specific definitions and conditions for each category. For example, children's clothing is defined by size, and not every printed item counts as a "book." Check the Ontario government's current guidance and confirm with your accountant which of your products qualify.
Zero-rated and exempt supplies
Some goods are zero-rated, meaning they're taxable at 0% (basic groceries are a common example). Others are exempt, meaning no tax applies and you generally can't claim input tax credits for related costs. Most retail merchandise is fully taxable, but food retailers, health product sellers, and others should review classifications carefully.
How HST works for online sales
Online sales introduce the concept of place of supply. For most tangible goods shipped to customers in Canada, the tax rate is based on where the goods are delivered, not where your business is located.
That means an Ontario business shipping to:
- Ontario charges 13% HST.
- Alberta charges 5% GST (Alberta has no provincial sales tax).
- An Atlantic HST province charges that province's HST rate.
- British Columbia, Saskatchewan, or Manitoba charges 5% GST, and may also need to consider provincial PST obligations if you meet those provinces' registration requirements for out-of-province sellers.
- Quebec charges 5% GST, and may need to consider QST registration depending on your sales into Quebec.
PST and QST rules for out-of-province sellers have become stricter in recent years, especially for digital sellers. If you have meaningful sales into those provinces, get professional advice.
Local pickup
If a customer orders online and picks up at your Ontario store, the goods are supplied in Ontario, so 13% HST generally applies regardless of where the customer lives.
Configuring taxes in Shopify
Shopify includes built-in tax settings for Canada. Here's how to approach setup.
Step 1: Confirm your business address and locations
Your store address and each location's address should be accurate. Shopify POS uses the location address to determine tax on in-store sales.
Step 2: Set up tax collection for Canada
In Settings → Taxes and duties, go to your Canadian market and enter your GST/HST registration number. Shopify uses its tax tables to calculate the appropriate federal and harmonized rates based on the destination.
For provinces with PST or QST, add registrations only if you're actually registered there. If you aren't registered for a provincial tax, don't collect it.
Step 3: Decide whether prices include tax
In Canada, prices are commonly displayed before tax, with tax added at checkout. That's Shopify's default for Canadian stores. Some businesses, such as certain food vendors or event sellers, prefer tax-inclusive pricing for simplicity. Choose deliberately and communicate clearly.
Step 4: Create tax overrides for special products
Tax overrides let you apply a different rate to specific products or collections in specific regions. This is how you handle Ontario's point-of-sale relief. A common approach:
- Create a collection, such as "Ontario HST Relief — Children's Clothing," containing eligible products.
- In your tax settings for Ontario, create an override for that collection that charges only the 5% federal portion.
- Test by adding a product to the cart with an Ontario shipping address and by ringing it up on POS.
Remember that an override for Ontario doesn't automatically apply elsewhere; for customers in other provinces, standard GST/HST rules for their province apply.
Step 5: Mark non-taxable products
If a product is zero-rated or exempt, you can mark it as not taxable at the product variant level (by unchecking "charge tax") or use overrides where more nuance is needed.
Step 6: Shipping charges
In Canada, shipping charges are generally taxable at the same rate as the goods being shipped. Shopify can apply tax to shipping automatically. Review how mixed carts (taxable and non-taxable items) are handled and confirm the treatment with your accountant.
Step 7: Test thoroughly
Before relying on your setup, run test orders to several provinces and ring up test sales on POS, including items with overrides. Compare the results with what your accountant expects.
Handling tax changes quickly
Tax rules can change on short notice. Between December 2024 and February 2025, the federal government temporarily removed GST/HST from a list of items, including certain children's clothing, toys, restaurant meals, and holiday-season goods. Businesses had only a few weeks to adjust their systems, then change them back again.
Lessons from that experience apply to any future change:
- Organize products into tax-related collections so you can apply overrides quickly.
- Tag products with tax categories (for example, "tax:children-clothing") to make filtering easier.
- Document your tax setup so anyone on your team can understand it.
- Subscribe to CRA and Ontario Ministry of Finance updates.
- Test changes before the effective date and schedule a reminder to reverse temporary changes.
Reporting and remittance
Shopify's reports can summarize taxes collected by jurisdiction and period. Use these to prepare your returns, but reconcile them with your accounting system. Many Ontario merchants connect Shopify to accounting software such as QuickBooks Online or Xero through an app so sales, fees, and taxes flow into the books automatically.
Keep in mind:
- Refunds reduce tax collected. Make sure your reports and accounting reflect refunds and returns correctly.
- Shopify fees include HST. As a registrant, you can generally claim input tax credits for HST paid on Shopify subscriptions, apps, and hardware.
- Payment processor fees are generally exempt financial services in Canada, but confirm treatment with your accountant.
- Cross-border sales have their own documentation requirements; see the U.S. expansion article in this series.
Receipts and invoices
Canadian rules specify what information receipts and invoices should contain, and requirements increase with the value of the sale (especially for business customers who want to claim input tax credits). At a minimum, your Shopify receipts should show:
- Your business name
- Your GST/HST registration number
- The date
- Items purchased
- The amount of tax charged (or a statement that tax is included)
- The total
For B2B customers, include their business name and payment terms on invoices where appropriate.
Special situations
Gift cards. Selling a gift card is generally not a taxable supply at the time of sale. Tax applies when the gift card is redeemed for taxable goods. Shopify handles this automatically.
Discounts and coupons. Tax is typically calculated on the discounted price when the discount is provided by the merchant. Manufacturer coupons can be treated differently, so check with your accountant if you accept them.
Bundles. If a bundle combines taxable and non-taxable items, the tax treatment can be complex. Consider pricing items separately or getting advice.
Donations and charity add-ons. Collecting charitable donations at checkout has its own considerations; configure them as non-taxable and ensure proper handling.
Events outside Ontario. If you sell in person at a trade show in another province, that province's rates apply to those sales. Create a separate location in Shopify for the event so POS uses the correct address.
A tax setup checklist
- [ ] I understand whether I'm required to register for GST/HST.
- [ ] My GST/HST number is entered in Shopify.
- [ ] Store and location addresses are accurate.
- [ ] I've identified products eligible for Ontario point-of-sale relief and set overrides.
- [ ] Zero-rated or exempt products are configured correctly.
- [ ] I know whether I have PST or QST obligations in other provinces.
- [ ] Receipts include required information.
- [ ] Shopify is connected to my accounting software.
- [ ] I've tested orders to multiple provinces and in-store sales.
- [ ] My accountant has reviewed the setup.
Key takeaways
- Ontario's HST rate is 13%, but online sales are generally taxed based on the customer's delivery destination.
- Ontario offers point-of-sale relief of the provincial portion for specific product categories; configure these with Shopify tax overrides.
- Shopify's tax tools handle most Canadian scenarios, but you're responsible for correct registrations and product classifications.
- Organize products into tax-related collections so you can respond quickly to future tax changes.
- Always test your setup and have it reviewed by a qualified accountant.
This article is general information, not tax or legal advice. Tax rules and rates change; confirm current requirements with the Canada Revenue Agency, the Ontario Ministry of Finance, and a qualified professional.