Taxes and everyday expenses
Through the course of our everyday lives, we pay for goods and services that are necessary. What kinds of taxes are charged on these goods and services? Are there exemptions? Let’s find out!
What taxes are charged on everyday expenses?
Some of the everyday goods and services for which you pay are subject to a sales tax, the GST or the HST. In some provinces, a second sales tax is added to the GST, the PST (or QST in Quebec). These sales taxes are applied to any goods or services you purchase that are considered a “taxable supply” by the government. When you shop, you will notice the tax on your receipts, which is added to the sales price.
Are there any expenses that are exempt from sales taxes?
Yes, these are what the government calls “zero-rated supplies” and “exempt supplies.” A zero-rated supply is charged 0% tax (zero rate) but is still considered a taxable supply. For you, the consumer, this means that you don’t pay any sales tax on it. Examples of these are:
- Prescription drugs
- Basic groceries (such as fresh produce and non-processed foods)
- Agricultural and fishing products
- Goods and services exported from Canada
- Foreign travel (destination outside Canada)
The most common exemption you encounter is basic groceries. The key here is to buy fresh, healthy foods; any food you buy that is processed in any way is not eligible for the zero rate. For example, salads (not vacuum sealed or canned) and sandwiches (not frozen), which might be made with fresh ingredients, are not eligible for the zero rate. So, eating fresh, healthy foods like fruits and vegetables is not only good for your health but for your wallet as well!
Exempt supplies are completely exempt from sales tax. Examples of these are:
- Health and dental care (excluding cosmetic services)
- Financial services
- Sale of real estate property (land and building excluding new developments)
- Education fees that lead to a diploma
- Child care services
- Most services provided by charities and not-for-profit organizations (NPOs)
In this case, dealing with charities and NPOs is not only the right thing to do, but also the smart thing to do money-wise.
If I keep my receipts, can I deduct the sales tax on my tax return?
Unfortunately no, for the most part. Unless you had expenses from your job that your employer did not reimburse, or you paid membership dues to a professional association (think nurses, engineers, accountants, etc.), you cannot deduct the sales tax paid for the goods and services that you bought. However, all is not lost! You might be eligible for the GST credit, which is a quarterly payment from the government to help with the sales taxes that you pay every day. You can claim the credit by simply filing your tax return every year. However, your income has to be under a certain amount in order to qualify: about $44,000 for a single individual and about $54,000 for a couple with children.
Cheaper by the… half dozen?
Earlier, we mentioned that processed foods are not eligible for the zero-rating tax. However, there’s one exception to this rule: desserts! Food items such as cakes, pastries, muffins, pies, tarts, cookies, doughnuts, brownies, and croissants with sweetened filling are not charged any sales tax if you buy at least 6 of them. So, the next time you go to your favourite doughnut shop (you know, the one where you indulge your coffee addiction every morning!), make sure to optimize your purchase!
Want to learn more about sales taxes and your everyday expenses? Connect with Income Tax Ottawa.