Ontario has a 13% Harmonized Sales Tax (HST). This tax is made up of two different taxes. However, the tax will be created as one whole tax.
- Provincial Sales Tax (PST) of 8%
- Goods and Service Tax (GST) of 5%
Most items will normally fall under the HST, which can be set as the default prevailing tax rate. However, certain items and rules may apply that may either rebate(remove) the 8% PST from the HST, remove tax entirely from the order depending on quantity sold, or only charged the GST.
This article will go over setting up the 13% HST, then the special rule where if qualifying products are under $4.00, the PST is rebated and if 6 or more are rung up, is zero-rated (tax free).
Initial Tax Settings
Before creating the special tax rules, a prevailing tax of 13% for the HST should be created. This tax will apply to ALL the products created initially.
- Log into the Revel Management Console
- Select Products on the toolbar
- Select Tax Groups on the left
- Select Prevailing Tax Rate -> Create a new tax called HST for 13% -> Hit Create
- Set the Tax Rule to “Tax Class A”
- Hit the save icon at the top to complete
If client sells items that are only charged the 5% GST, create a new tax group with a new tax called GST for 5%. Then assign all those products via the product list above the tax rules. Click here to learn how.
Special Tax Settings
Once the 13% HST has been created, special settings must be applied to products that fall under each rule.
Qualifying prepared food and beverages: Ontario provides a relief of the 8% PST for certain qualifying products if the total price, excluding HST, is under $4.00. This means if a customer purchases $3.00 worth of qualifying products, they will receive a tax rebate of the 8% PST and only be charged the 5% GST.
To set this up, each product that qualifies will belong in either Class A or Class B. This can be set within each products detail’s page. Under Products -> Products, navigate through the menu to the desired product then select the details button (pencil icon).
- Class A: All items totaling less than 4.00 will have the PST (8%) rebated back
- Class B: Items sold with Class A where the total is less than 4.00 will have the PST (8%) rebated back
Example: Sandwich (Class A item) 2.00 and Soda (Class B item) $1.00
- If both items are rung up, total $3.00, the entire $3.00 will have the 8% tax rebate
- If 1 Sandwich and 3 Sodas are rung up (2.00 + 3.00 = $5.00), since the total is over $4.00 from both classes, only the $2.00 from Class A will have the 8% tax rebate while the other $3.00 from Class B will be taxed the full 13% HST
- If 3 Sandwiches are rung up, since the total is over $4.00, the total $6.00 will be taxed the full 13% HST
For more information on this Ontario tax rule, please visit their official website.
Rated-Zero for Quantity 6 or Higher: Certain qualifying products fall under a rule where if the customer purchases 6 or more, it becomes zero-rated, aka tax-free, regardless if it passes the $4.00 threshold. Items that fall under this category include items such as cakes, muffins, pies, cookies or similar products where they are not prepackaged for sale to consumers and sold in single servings.
These products will need to be assigned two Tax Groups.
- Create a new Tax Group for these products
- Select each item that falls under this category in the list above
- Set the Tax Rule to Tax Class A
- There is no need to select a tax rate here. Hit Save at the top to complete
- Select Untaxed Group
- Select each item that was selected for step 2
- Check on the “Untaxed” rate or create a new one if no 0% tax exist. Hit Save at the top to complete
- Go into the individual product details page to change its’ tax class to A
These products will have the 8% tax rebate if under $4.00 AND if quantity is 6 or more, it is zero-rated.