GST/QST Obligations for Retail Stores in Quebec: Sales Tax on Products, Returns, Discounts, Gift Cards, and POS Systems

Introduction

Retail stores in Quebec — clothing shops, electronics stores, beauty supply stores, grocery retailers, furniture shops, and specialty boutiques — must follow strict GST/QST rules.
Because retail involves high transaction volume, POS systems, promotional pricing, returns, and staff discounts, even small errors can create major inconsistencies in GST/QST reporting.
Revenu Québec audits retail businesses aggressively due to discrepancies between cash, POS data, bank deposits, and sales tax filings.
This guide explains how GST/QST applies to retail sales, discounts, refunds, gift cards, inventory, and returns so retail owners can stay compliant.

Legal and Regulatory Framework

Under the Excise Tax Act (GST) and the Quebec Taxation Act (QSTA):

• Most retail product sales are taxable unless zero-rated or exempt (specific groceries, medical devices, etc.).

• GST/QST must be charged at the point of sale on the selling price after discounts.

• Gift cards are not taxable at purchase — tax applies only when redeemed.

• Returns and refunds require GST/QST adjustments.

• Coupons, rebates, and loyalty points have special tax rules.

• Retailers must maintain accurate POS records, Z-reports, inventory counts, and receipt logs.

Authorities enforce:

• ETA s.165/QSTA s.16 — tax on taxable supplies

• ETA s.221/QSTA s.22 — obligation to collect

• ETA s.169(4)/QSTA s.39 — documentation requirements for claims

• ETA s.286/QSTA s.24 — books and records obligations

Key Court Decisions

Courts have ruled that:

• GST/QST must be calculated on the final transaction price, not the sticker price.

• Coupons funded by manufacturers may adjust the taxable base differently than retailer-funded discounts.

• Missing POS summaries or cash register tapes justify reassessment.

• Inconsistent cash deposits vs. reported sales are grounds for audit expansion.

• Gift card breakage (unused balances) does not generate GST/QST unless redeemed.

• Inventory discrepancies create tax risk because purchases must align with sales.

These rulings reinforce strict documentation and reconciliation requirements.

Why CRA and Revenu Québec Target These Issues

Retail is high-risk because:

• POS systems may be set up incorrectly.

• Discounts and promotions often miscalculate GST/QST.

• Staff meals, employee discounts, and complimentary products lack proper tax treatment.

• Returns/refunds are not reversed properly for GST/QST.

• Cash and credit card sales must match deposit records.

• Retail businesses sometimes underreport taxable sales through POS manipulation.

• Supplier invoices are frequently missing GST/QST registration numbers.

Industries most reviewed: clothing, electronics, cosmetics, grocery, home décor, convenience stores, specialty retailers, and hardware stores.

Mackisen Strategy

We help retail businesses maintain full GST/QST compliance through detailed operational controls.

1. POS System Compliance Review

We audit:

• Tax settings

• Discount logic

• Coupon handling

• Gift card treatment

• Return/refund workflows

• Z-reports and daily summaries

2. Sales Reconciliation

We reconcile:

• POS totals

• Cash deposits

• Credit card merchant slips

• Online orders

• Inventory movements

3. Discounts, Promotions & Loyalty Programs

We ensure:

• Correct application of taxable vs. non-taxable coupons

• GST/QST applied after discounts

• Manufacturer vs. retailer-funded coupon distinction

• Points redemption rules applied correctly

4. Supplier Invoice & Inventory Review

We verify:

• GST/QST compliance of supplier invoices

• Documentation for ITCs/ITRs

• Inventory vs. cost of goods sold

• Shrinkage and loss adjustments

5. Audit Defence

If Revenu Québec initiates a review, we prepare:

• Daily sales summaries

• Inventory calculations

• POS reports

• Proof of tax collection

• Legal arguments based on ETA/QSTA

Real Client Experience

A Montreal electronics store misapplied GST/QST on bundled promotions (“buy one, get one 50% off”), causing under-collection of QST for two years.
Revenu Québec issued a reassessment exceeding $18,000.
Mackisen corrected POS programming, recalculated sales tax adjustments, and negotiated a reduction by demonstrating that errors were technical and unintentional.
This illustrates how discount structures can create tax risks.

Common Questions

1. Are all retail products taxable?
Most are — except zero-rated groceries and specific exempt items.

2. Are gift cards taxable?
No — GST/QST applies only when redeemed.

3. How do coupons affect GST/QST?
It depends on whether the manufacturer or retailer funds the coupon.

4. Do I need to adjust GST/QST for returns?
Yes — refunds must reverse the original tax.

5. Can inventory losses affect GST/QST?
Yes — large discrepancies increase audit risk.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps retail stores stay compliant while recovering the taxes they're entitled to. From POS setup to audit defence, our expert team ensures accurate GST/QST reporting and reduced audit exposure.

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GST/QST rules for retail stores in Quebec — learn how sales tax applies to products, discounts, gift cards, and returns, and how to avoid costly audit issues.