Do You Pay Tax on Private Car Sales in Ontario?
In Ontario, we’re accustomed to paying sales tax on many things we buy from stores and other retail locations, including new and used vehicles. Those retailers, also known to the Canada Revenue Agency (CRA) as GST/HST registrants, collect the 13 per cent harmonized sales tax (HST) on behalf of the government, and then remit that amount to the CRA.
But what if you buy a used car in Ontario from a private seller who is neither a licensed car dealer nor a GST/HST registrant? You still have to pay 13 per cent sales tax, but it’s called RST – retail sales tax – and the process of paying it works differently.
How does the Ontario government collect RST on private used vehicle sales?
Because most people who sell used cars privately are not registered dealers, they don’t have to collect sales tax on behalf of the government.
Instead, as the buyer, you pay the RST when you register the vehicle in your name at a ServiceOntario office.
The RST is calculated based on the greater of the vehicle’s purchase price or its wholesale value as calculated by Canadian Red Book. However, if the car’s Red Book value is less than $1,000, you will pay RST on the purchase price.
If the vehicle you’re buying is “excessively used” or “severely damaged” as defined by the Ministry of Transport, but is still valued at more than $1,000, you can have it appraised. If the appraised value and the purchase price are both less than the Red Book value, you will pay RST on the higher of the appraised value or purchase price.
If you buy a vehicle privately in another province or territory and then bring it back to Ontario, the RST will be calculated based on the purchase price.
What about antique vehicles?
According to the Ontario Ministry of Transport, for sales tax purposes, an “antique” vehicle is one that is 20 years or older at the time of registration. If that describes the car or truck you’re buying, you’ll pay RST based on whichever is higher: the purchase price, the insurance replacement value, or the vehicle’s appraised value. When you register the car, you’ll be asked to provide a bill of sale showing how much you paid, plus either proof of an appraisal or an insurance policy showing the car’s insured value.
We discuss Ontario car insurance in more detail here.
Are any other kinds of vehicles subject to sales tax on private sales?
The Ministry of Transport’s list of specified vehicles goes well beyond cars and light trucks. It includes any vehicle that requires a permit to be legally operated on a public road or highway, like motorcycles, motor scooters, mopeds, buses, trucks, vans, motor homes, and camping trailers.
The Ministry of Transport also collects RST on privately purchased off-road and snow vehicles that require operation permits, as well as boats and aircraft.
Can you avoid paying sales tax on privately purchased used vehicles?
There are situations when you may not have to pay HST on a used vehicle you want to register in your name. Those include when you receive a car as a gift from a family member in Ontario, or when one is left to you in someone’s will, whether you were related to them or not.
Also, you may not have to pay RST to register a vehicle if you are moving to Ontario from another province, or you are a foreign diplomat moving here as a representative of your country.
Finally, Status Indians are exempt from paying sales tax on privately purchased used vehicles. Learn more about RST in Ontario here.