Are You Calculating GST/QST (TPS/TVQ) Correctly? Quick Formula Check to Prevent Costly Underpayments

Applying the right GST/QST (TPS/TVQ) rates seems simple, but even small mistakes can result in penalties, reassessments, or lost trust with Revenu Québec. Mackisen CPA Montreal explains how to verify your calculations, avoid common errors, and ensure full compliance under the Excise Tax Act and Tax Administration Act.

Why Correct Calculation Matters

Your GST/QST (TPS/TVQ) filing is built on one basic rule: what you collect must match what you remit.
Every sale or service must apply the correct rates 5% GST and 9.975% QST in the correct order. A single misstep can lead to serious consequences:

• Overcharging clients, damaging relationships.

• Underpaying Revenu Québec, leading to penalties.

• Audit-triggering discrepancies between CRA and ARQ data.

In 2024, Le Journal de Montréal reported that over 30% of small Quebec businesses made tax calculation errors, mostly due to software misconfiguration or manual entry mistakes. Mackisen CPA Montreal helps clients catch these issues before filing — not after an audit notice.

The Correct TPS/TVQ Calculation Formula

When calculating Quebec sales taxes, you must apply QST after GST, because QST is calculated on the subtotal plus GST.
Here’s the official formula:

Example: Product sold for $100.00

• GST (5%): $100 × 0.05 = $5.00

• Subtotal including GST: $105.00

• QST (9.975%): $105 × 0.09975 = $10.48

• Total price with taxes: $115.48

This “tax-on-tax” method often surprises new business owners, but it’s mandatory under Quebec’s Act Respecting the Québec Sales Tax (CQLR c. T-0.1).
If you skip this step and calculate QST only on the base amount, your filing will be short and Revenu Québec can assess interest on every missed cent.

How to Check If You’re Applying the Right Rates

1. Review your invoices and POS system setup.
   Verify that your accounting or sales software applies both taxes correctly, in sequence.

2. Compare total taxes charged to CRA and ARQ remittances.
   Your filing data must match what your system collects even small rounding errors can accumulate.

3. Use CRA and Revenu Québec online calculators.
   Double-check your manual entries against official tools to confirm that your rate application is correct.

4. Run a “reversal test.”
   Work backward from your total sale price to confirm that the tax breakdown matches official rates (5% + 9.975%).

5. Consult a CPA if you sell to multiple provinces.
   The harmonized HST rules differ outside Quebec cross-province filings require careful allocation.

Mackisen CPA Montreal provides quarterly accuracy audits, ensuring every client’s rates, reports, and systems remain aligned.

Common Calculation Errors to Avoid

• Applying QST before GST.
  This reverses the tax sequence and leads to short remittance.

• Charging 15% (HST rate) instead of Quebec’s separate GST + QST system.
  Quebec businesses must always split GST and QST.

• Incorrect rounding on invoices.
  Always round to the nearest cent after calculating both taxes.

• Neglecting tax on delivery or digital services.
  Many business owners mistakenly mark these as non-taxable when they are not.

• Mixing exempt and zero-rated sales.
  “Exempt” means no credit recovery; “zero-rated” still allows ITC/ITR claims — a key difference for compliance.

By performing regular cross-checks, Mackisen CPA Montreal clients maintain consistent, audit-proof accuracy in every transaction.

Quick Double-Check Formula for Business Owners

To validate your math manually, use this shortcut:

GST/QST combined rate factor = 1.14975
Multiply your taxable sale amount by 1.14975 to confirm your total with taxes.
If the number doesn’t match your invoice totals, your rates or tax setup need correction.

Example:
$100 × 1.14975 = $114.98 (same as $115.00 within rounding).
Any large discrepancy is a red flag fix it before filing.

Real Example — When Incorrect Tax Setup Cost a Business Thousands

A Montreal salon incorrectly applied QST before GST in its software for over a year. The discrepancy just 0.5% per transaction led to $3,400 in underpaid tax plus $700 in interest. After consulting Mackisen CPA Montreal, we corrected their invoicing system, recalculated their returns, and filed an adjustment through Revenu Québec’s online amendment portal. The client has since automated their rate verification through our CPA-approved template and hasn’t missed a cent since.

Mackisen CPA Montreal — Accuracy You Can Trust

At Mackisen CPA Montreal, we believe compliance starts with precision. Our team verifies every client’s GST/QST (TPS/TVQ) configuration and ensures correct application across all systems — invoicing, accounting, and e-commerce.

Our services include:

• Tax rate verification under CRA and ARQ law.

• Automated GST/QST reconciliation setup.

• Filing accuracy reviews and adjustments.

• Correction of software and POS configurations.

• Audit-ready records and compliance coaching.

We help you file with absolute confidence every number verified, every rate correct, every deadline met.

Key Takeaways

1. Always apply GST first, then QST on the subtotal.

2. Check your software configuration for correct sequence and rates.

3. Use 1.14975 as a combined rate multiplier for accuracy checks.

4. Review invoices monthly to ensure consistent calculation.

5. Partner with a CPA to eliminate small errors before they grow into penalties.

Mackisen CPA Montreal Precision That Pays
With over 35 years of combined expertise, our CPA team ensures every Quebec business meets its tax obligations perfectly — no errors, no surprises. Accurate GST/QST (TPS/TVQ) filings today mean stronger financial credibility tomorrow.