Car Sales Tax Across Canada: Who's Paying What & Where

November 2, 2019

When George Harrison wrote his famously catchy song “Taxman” back in 1966, it was considered a protest against England’s arguably excessive tax structure. Over 50 years later and two aspects about this song remain true – the Beatles rock and paying tax does not. Let’s talk about car sales tax and how you can use it to your advantage...

Paying the taxman is especially painful when it comes to major purchases like a car. It can be as high as 15% on the sticker price depending on which province you live in. It can even be as high as 20% if you’re buying a luxury vehicle. That significantly affects your buying power. 

But are all provincial taxmen (and women) created equal? Whether you’re paying GST, HST, PST or RST on a motor vehicle purchase, the tax rate is going to vary province to province. So, is it possible to purchase a car in a province with lower taxes and score a deal? Let’s explore this concept and see if it’s a feasible way to avoid paying an inordinate amount of car sales tax. 

Buying a car in another province 

Buying a car is not a simple transaction. It’s not like buying a coat in Toronto and wearing it home to Montreal. Vehicles must be registered with government agencies, which makes buying one across provincial borders a little tricky. Naturally, you want to register your car in your home province so that complicates the idea of driving home your new purchase.

Even if you choose not to register it yet, you will need to find transportation to bring your new purchase home. That could be expensive. And if it’s been previously registered in a different province, you will need to transfer the title and registration to your home province. Expect to pay between $80 and $150 for this service. 

Where’s the cheapest provincial sales tax?

Between the GST, PST, HST, and even QST, there are a lot of acronyms to know when it comes to paying tax on retail goods in our country. 

The GST (Goods and Services Tax) is a federal tax of 5% and there’s no escaping it, unless you are buying from a private seller. In BC, however, you may not have to pay 5% GST on a private sale, but you will pay up to 5% more in PST than you would at a dealership (see below). PSTs are provincial sales taxes while HST is a harmonized sales tax combining GST and PST. Meanwhile, QST is Quebec’s version of the PST.

So, who’s paying the most and who’s paying the least amount of tax when buying a vehicle? Maritimes provinces New Brunswick, Newfoundland and Labrador, Nova Scotia, and PEI all pay an HST of 15%, while Quebec is right up there at 14.975%.

Province 

Applicable tax rate  

Provincial rate (PST/RST/QST)

Federal rate (GST)

Total (HST)

Alberta

GST

0%

5%

5%

British Columbia 

GST + PST

7% (for a vehicle under 55K)

5%

12%

Manitoba 

GST + RST

7%

5%

12%

New Brunswick

HST

10%

5%

15%

Newfoundland and Labrador

HST

10%

5%

15%

Nova Scotia

HST

10%

5%

15%

Ontario

HST

8%

5%

13%

PEI

HST

10%

5%

15%

Quebec

GST + QST

9.975%

5%

14.975%

Saskatchewan

GST + PST

6%

5%

11%

Provincial tax breakdown for new & used vehicles purchased at a dealership

On the other side of the tax spectrum, Alberta is the clear winner with zero provincial sales tax. Some have called this the “Alberta Advantage,” and you can see why when surveying other provinces. Next door neighbours Saskatchewan has the second lowest tax rate at 11% when combined with the GST. BC—and Manitoba, which just lowered its PST by one percentage point on Canada Day—follows at 12%, then Ontario with 13%. The table directly below outlines how much tax you'll pay when you buy a vehicle in a private sale.

Province 

Applicable Tax rate 

Provincial rate (PST/RST/QST)

Federal rate (GST)

Total (HST)

Alberta

-

0%

0%

0%

British Columbia 

PST

12% (for a vehicle under $55K) 

0%

12%

Manitoba 

RST

7%

0%

7%

New Brunswick

PST

15%

0%

15%

Newfoundland and Labrador

PST

15%

0%

15%

Nova Scotia

PST

15%

0%

15%

Ontario

RST

13%

0%

13% 

PEI

PST

15%

0%

15%

Quebec

QST

9.975%

0%

9.975%

Saskatchewan

PST

6% (for a vehicle over $5K)

0%

6%

Provincial tax breakdown for new & used vehicles purchased through private sales

The curious case of British Columbia

In BC, sales tax gets a little trickier. With a privately sold vehicle, you may not pay the 5% GST that you would pay at the dealership, but you’ll pay more in PST for any vehicle costing under $125,000. 

And any higher tax rate applies to the total amount, not just the incremental amount. Hypothetically, it means that—along with the 5% GST—you’ll pay 25% in taxes on a luxury car costing $200,000. That’s $50,000!

Price of vehicle (dealership)

PST

Price of vehicle (private sale)

PST

Under $55,000

7%

 

$55,000 - $55,999

8%

$56,000 - 56,999

9%

$57,000 - $124,999

10%

Under $124,999

12%

$125,000 - $149,999

15%

$125,000 - $149,999

15%

Over $150,000

20%

Over $150,000

20%

PST for new or used vehicles purchased in BC

Is it worth it to cross-border shop in Alberta for cars? 

Now that we’ve surveyed the retail tax landscape, and shown the relative parity between provincial tax systems, it’s pretty clear there’s only one scenario in which cross-border shopping is even worth considering. If you’re a resident of BC, or even Saskatchewan, you’re looking at Alberta and it's no-PST as a possible way to save.

If only it was as easy as buying a car off the dealer lot in Alberta and driving it home to BC, a lot more people would do it. However, as we mentioned, your car needs to be registered and insured before it can be driven. So, in the case of a BC resident buying a car in Alberta, you will have to register and insure it in Alberta before you can drive it home, and then you will have to do it all over again in your home province, plus it likely will need to pass BC-designated inspection. On top of that, according to ICBC Provincial PST must be paid at the time of registration in BC unless you qualify for an exemption (gifts, new residents, etc.).

Clearly the BC government has made substantial efforts to safeguard against drivers buying their cars from a tax-free neighbouring province. We can assume that would mean a substantial hit to the BC economy.

How to calculate sales tax on a used car

A common misconception about buying a used vehicle is that you don’t have to pay tax on the purchase. Picture a scenario where you find a car listed privately on a website and you agree to buy that car. You pay the asking price and no tax is factored into the sale. 

Because the seller is not a GST/HST/PST registrant – such as a dealership that claims it as part of their business taxes – they are not required to collect the tax from you. However, once you register your vehicle, your provincial government could collect the tax from you on the sale.

It differs by province, with Alberta once again exempt from any tax on private sales, while provinces like Ontario, BC, Manitoba and Saskatchewan each collect some form of vehicle sales tax.

The trade-in tax savings advantage

An easy way to save money on tax when buying a car is to take advantage of trade-in benefits. When you trade in your car, the amount of the new purchase is reduced by the value of your trade in, and then you only need to pay tax on that reduced amount of the sale. It can also reduce your payments in the long term if you are financing. 

Here’s a few examples:

Alberta

  • You buy a new truck in Alberta for $40,000
  • You trade in your old truck for $10,000. 
  • You only need to pay the 5% GST on the $30,000 difference. 
  • Your bill would be $31,500 instead of $42,000. 
  • Your tax savings is $500

British Columbia

  • A BC resident purchases a sporty SUV for $35,000
  • They trade in their old SUV for $5,000
  • They pay 12% on $30,000 ($36,000) as opposed to 12% on $35,000 ($39,200). 
  • That’s a substantial savings of $3,200. 
  • Think about this way: the value of your trade-in vehicle went from $5,000 to $8,200!

This is why many people prefer trade-ins to selling privately. On average, you get more for your vehicle when you sell it yourself. But that process can require mechanical repairs, refurbishment, detailing and the time spent listing and meeting with prospective buyers. As you can see with trade-in tax savings, you’re getting closer to the price you would get by selling privately.

Canada Drives can help you find the best place to trade-in and upgrade

If you’re thinking about upgrading your vehicle and don’t have time to sell it yourself, why not take advantage of the tax savings to be made and trade it in with one of Canada Drives’ certified dealerships.

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