How taxes work when it comes to freight bills

Why am I paying a different provincial tax rate than the province I am physically in? 

Shipping goods between provinces can be complicated, especially when it comes to taxes. The freight charge bill for each shipment needs to include the correct provincial tax for the destination province, and understanding how this works is essential for staying compliant and avoiding costly penalties.

In Canada, taxes are applied differently to shipments between provinces than they are to intrastate shipments. When a shipment is moved between provinces, it is considered to be moving inter-provincially, and the carrier is responsible for collecting the Harmonized Sales Tax (HST) at the destination province’s rate. This tax is then paid to the government of the destination province by the carrier on behalf of the shipper.

The freight charge bill for inter-provincial shipments should include two components: the freight charge itself, and the applicable provincial HST. It is important to note that the rate of HST is different in each province, so the rate will vary depending on the destination of the shipment. For example, British Columbia has a rate of 12%, while Alberta has a rate of 5%.

How are taxes charged on transportation/freight bills in Canada from province to province? 

In Canada, the taxes charged on transportation or freight bills between provinces can be complex, as different provinces have their own tax laws and regulations that may apply. The specific tax treatment will depend on various factors, such as the type of goods being shipped, the origin and destination of the shipment, and the carrier providing the transportation services.

Generally, when goods are shipped from one province to another, there are two types of taxes that may apply: the federal Goods and Services Tax (GST) and the provincial sales tax (PST), where applicable. Some provinces, such as Ontario and Prince Edward Island, have harmonized their provincial sales tax with the GST, resulting in a harmonized sales tax (HST) that combines both taxes.

The tax treatment of transportation or freight charges will depend on whether the services are considered to have taken place in the province where the carrier is based or in the province where the services were performed. If the carrier is based in the same province as the origin or destination of the shipment, the tax treatment is generally straightforward, as the carrier will charge the appropriate provincial sales tax or HST based on their location.

However, if the carrier is based in a different province than the origin or destination of the shipment, the tax treatment can become more complex. In this case, the carrier may be required to allocate the freight charges based on the portion of the transportation services that were performed in each province, and charge the appropriate taxes accordingly.

Are there additional taxes besides the sales and provincial tax? 

Yes. In addition to the provincial HST, some provinces also have additional taxes that must be applied to certain types of shipments. For instance, Ontario has a fuel tax applied to shipments moving within the province, and Alberta has a carbon levy applied to shipments that contain certain types of fuel. It is important to understand the different taxes that may be applicable to shipments in each province in order to accurately apply the taxes to freight bills and remain compliant with government regulations.

What if I am shipping internationally? 

It is also important to note that the rate of HST is different for shipments entering Canada from an international destination. When shipping from the US to Canada, the GST must be applied at a rate of 5% (plus the applicable provincial tax rate). The US does not collect taxes for shipments entering the US, however the Canadian government will require importers to report the value of the goods being imported and pay any applicable taxes. When shipping from Canada to the US, the Canadian government will not collect taxes, however the US may require that the importer pay duties and/or taxes on the imported goods. For both shipments, it is important to understand the regulations in the destination country in order to ensure compliance.

Why do I have to pay taxes on freight bills? 

When shipping goods, taxes are often incurred on the freight bill. Taxes are applied for the purpose of regulating the flow of goods into and out of countries. In the US, taxes are collected from the importer at the time of import and these taxes are used to fund government services. In Canada, taxes are collected from the exporter at the time of export in order to fund government services. Depending on the country, taxes may also be collected when a shipment moves within the country as it is being transported.

Taxes help to ensure that goods are being shipped in a safe and compliant manner, as well as providing revenue for the government. It is important to understand the regulations of the destination country regarding taxes in order to ensure that all taxes applicable to the shipment are paid. Additionally, it is important to keep accurate records of all taxes paid on freight bills in order to ensure compliance with government regulations.

How do I calculate the taxes I will be charged on my freight bills? 

You can always reach out to our accounting department and we will be able to tell you what taxes will be due on your bill based on the locations you are shipping between! Just chat with us, call us or send us an email to accounting@shipmoto.com.

For shipments moving within Canada, the following provincial taxes may apply:

1. Goods and Services Tax (GST): This is a 5% federal sales tax that applies to most goods and services in Canada.

2. Harmonized Sales Tax (HST): This is a combination of the GST and the provincial sales tax. The rate of HST varies from province to province, with Ontario and New Brunswick having the highest rates of 13%.

3. Provincial Sales Tax (PST): This is a provincial sales tax that applies in some provinces (e.g. British Columbia and Manitoba). The rate of PST varies from province to province and ranges from 5% to 10%.

4. Quebec Sales Tax (QST): This is a 9.975% provincial sales tax that applies in Quebec.

5. Alberta Retail Sales Tax (RST): This is a 5% provincial sales tax that applies in Alberta.

6. Provincial Transportation Fuel Tax (PTF): This is an additional tax that applies to the purchase of fuel in some provinces (e.g. British Columbia and Ontario). The rate of PTF varies from province to province and ranges from 5% to 16%.