How to Calculate GST Backwards in Canada
29 SEP 2017
Canada has a national sales tax of 5 percent, and each province imposes its own sales tax on top of that. Provincial tax rates vary by province and the type of good you purchase. The national tax is called GST (general sales tax) and the combined national and provincial tax is called HST (harmonized sales tax). In Canada, many businesses include the sales tax in the price of an item or service. You can calculate the GST backwards with simple arithmetic.
Add the national and provincial tax rates for the type of item that you purchased, or look up the HST on your provincial government's website. This is the total tax rate. If you live in a province with no sales tax, the total rate is 5 percent.
Express the total tax rate as a decimal and add 1 to it. For example, if you live in Manitoba, the total tax is 12 percent, so you compute 0.12 + 1 = 1.12.
Divide the cost of the item by the number you computed to obtain the cost before taxes. For example, suppose you purchase a computer in Manitoba for $700 including tax. Since 700/1.12 = 625, the price before taxes is $625.
Multiply the pre-tax price by 0.05 to obtain the GST. For example, since 625 * 0.05 = 31.25, the general sales tax on the computer is $31.25.
Subtract the pre-tax price and the general sales tax from the total price. This is the provincial tax. For example, since 700 - 625 - 31.25 = 43.75, the provincial tax on the comuputer is $43.75.