How the GST Rate Reduction Affects Retail Sales Tax

Information Notice 62
Published: January 2008
Content last reviewed: August 2010
ISBN: 978-1-4249-4850-5 (Print), 978-1-4249-4852-9 (PDF), 978-1-4249-4851-2 (HTML)

Notice to the reader: For Retail Sales Tax (RST) – On July 1, 2010 the 13 per cent Harmonized Sales Tax (HST) took effect in Ontario replacing the existing provincial Retail Sales Tax (RST) and combining it with the federal Goods and Services Tax (GST). As a result, RST provisions described on this page and in other publications ended on June 30, 2010.

Effective July 1, 2010 this publication was archived for RST purposes only. Use caution when you refer to it, since it reflects the law in force for RST at the time it was released and may no longer apply.

In the October 30, 2007 Federal Economic Statement, the federal government proposed a rate reduction to the goods and services tax (GST) from 6 per cent to 5 per cent, effective January 1, 2008.

A number of formulas used to calculate Retail Sales Tax (RST) will be affected by the GST rate reduction. Several RST publications also refer to the previous 7 per cent GST rate or the 6 per cent GST rate. These publications will be updated to reflect the reduced rate.

This Information Notice explains the changes to the affected formulas effective January 1, 2008.

Tax-Included Pricing

The Retail Sales Tax Act (Act) allows the minister to grant authorization to use tax-included pricing in certain cases as noted below. Vendors who choose to use tax-included pricing must post a sign in a clearly visible location stating that prices include the applicable 8 per cent RST, or they must state the amount of RST included in each price.

The following vendors may use tax-included pricing:

those who operate parking meters or other devices requiring exact change for the use of a commercial parking space
those who operate eating establishments, provided all menu items are more than $4.00, excluding GST
those who sell alcoholic beverages
those who charge admission to places of amusement
other vendors who have received authorization from the ministry.

For more information, refer to RST Guide 208 – Tax-Included Pricing.

Taxable Goods

If a vendor's sign or price list states that 8 per cent RST is included but does not state the actual amount of RST included in the selling price of each item, the RST to be remitted will be calculated as follows:

multiply the total tax-included sales by 8/113.

If a vendor's sign or price list states that GST is included and RST is charged separately, the RST to be collected will be calculated as follows:

multiply the GST-included price by 7.6190 per cent.

Commercial Parking

Where tax-included pricing is used for commercial parking, the 8 per cent RST to be remitted will be calculated as follows:

multiply the total tax-included sales by 8/113 when GST is included
multiply the total tax-included sales by 8/108 when GST is not included.

Prepared Foods

Where the price charged for prepared food includes both 8 per cent RST and GST, the RST to be remitted will be calculated as follows:

multiply the total tax-included sales by 8/113.

Where the price charged for prepared food includes GST and is over $4.20, but RST is charged separately, the RST to be collected will be calculated as follows:

multiply the GST-included price by 7.6190 per cent.

For more information, refer to RST Guide 300 – Prepared Foods.

Alcoholic Beverages

Where the price charged for alcoholic beverages includes both RST at either 10 or 12 per cent and GST, the RST to be remitted will be calculated as follows:

multiply the total tax-included price for beverages taxed at 10 per cent RST by 10/115
multiply the total tax-included price for beverages taxed at 12 per cent RST by 12/117.

Where the price charged for alcoholic beverages includes GST and RST is charged separately, the RST to be collected will be calculated as follows:

multiply the GST-included price by 9.5238 per cent for beverages taxed at 10 per cent RST
multiply the GST-included price by 11.4286 per cent for beverages taxed at 12 per cent RST.

For more information, refer to RST Guide 302 – Alcoholic Beverages.

Admission Charges

Where the price charged for admissions to places of amusement is over $4.00 ($4.20 including GST), the 10 per cent RST to be collected will be calculated as follows:

multiply the GST-included price by 9.5238 per cent.

Where both GST and RST are included, the RST to be remitted will be calculated as follows:

multiply the total GST- and RST-included price by 10/115.

For more information, refer to RST Guide 303 – Admissions.

Capital Improvement Rebates

Rebates are available for religious, charitable or benevolent organizations undertaking capital investments, solar energy systems installed into residential premises, eligible electricity generating facilities, and deep lake-water cooling facilities.

The formula for these rebates is currently under review. Changes will be communicated at a later date. Where GST has been included in the contract price, vendors should continue to calculate the rebate by multiplying the payments made by 3 per cent.

Sales Made Prior to July 1, 2006

For any sales made prior to July 1, 2006 where tax-included pricing is used, vendors should continue to use the calculations that are detailed in RST Guide 208 – Tax-Included Pricing.

Sales Made Between July 1, 2006 and December 31, 2007

For any sales made on or after July 1, 2006 and on or before December 31, 2007 where tax-included pricing is used, vendors should continue to use the calculations that are detailed in the July, 2006 Info Notice titled "How the GST Rate Reduction Affects Retail Sales Tax (RST)".

For more information

For more information, please contact the nearest Ontario Ministry of Finance Tax Office listed under Taxes - Provincial (Retail) Sales Tax in the blue pages of your telephone directory, call the ministry at 1 866 ONT-TAXS (1 866 668-8297), or visit our website at ontario.ca/finance.