How to Calculate GST and QST on Your Invoices Correctly

Introduction

Whether you’re a freelancer, consultant, or incorporated business in Quebec, knowing how to calculate GST (Goods and Services Tax) and QST (Quebec Sales Tax) correctly on your invoices is essential for compliance. Incorrect calculations can lead to penalties, rejected payments, or delayed remittances with Revenu Québec and the Canada Revenue Agency (CRA).

This step-by-step guide from Mackisen CPA Montreal explains how to calculate GST and QST accurately, when to charge each tax, what exemptions apply, and how to format your invoices properly under federal and provincial tax laws.

Legal and Regulatory Framework

GST and QST are governed by:

• Excise Tax Act (R.S.C. 1985, c. E-15) — federal GST regulations.

• Quebec Sales Tax Act (R.S.Q., c. T-0.1) — provincial QST rules.

If your annual taxable revenues exceed $30,000 in any 12-month period, you must register for both GST and QST. Once registered, you must collect these taxes on all taxable goods and services supplied in Quebec.

• GST rate: 5% (federal).

• QST rate: 9.975% (provincial).

Both taxes are value-added, meaning they apply to the sale price of goods and services before any taxes.

Learning Insight

GST is calculated first, and then QST applies on the subtotal including GST — a common error among new businesses is to calculate QST only on the base price, which understates the tax owed.

Step-by-Step: How to Calculate GST and QST

Step 1 — Determine Whether to Charge GST and QST

You must charge both taxes if:

• You are a GST/QST registrant.

• You sell taxable goods or services in Quebec.

• Your customer is not exempt (e.g., financial institutions, certain charities).

Do not charge GST/QST if:

• You sell zero-rated items (e.g., exported goods, basic groceries).

• Your sales are fully exempt (e.g., educational or health services).

• You are a small supplier earning less than $30,000 in taxable revenue (voluntary registration is still allowed).

Step 2 — Apply the Correct Tax Rates

1. GST (5%) is applied to the pre-tax price.

2. QST (9.975%) is applied to the price including GST.

Formula:
Price × 1.05 × 1.09975 = Total (with both taxes included).

Example 1 – Standard Service ($100)

• Base price: $100.00

• GST (5%): $5.00

• QST (9.975% × $105): $10.48

• Total invoice amount: $115.48

Example 2 – Product Sale ($500)

• Base price: $500.00

• GST (5%): $25.00

• QST (9.975% × $525): $52.36

• Total invoice amount: $577.36

Step 3 — Include Both Tax Numbers on the Invoice

Every GST/QST registrant must include both registration numbers on invoices:

• GST No.: 123456789 RT0001

• QST No.: 123456789 TQ0001

Each invoice must show:

• Business name and address.

• Invoice date and number.

• Description of goods/services.

• Unit price, subtotal, GST, QST, and total.

• Payment terms.

Invoices without tax registration numbers can lead to disallowed Input Tax Credits (ITCs) or Input Tax Refunds (ITRs) for your clients.

Step 4 — Handling Special Cases

A. Out-of-Province Sales (Outside Quebec)

• Charge only GST if the customer is outside Quebec but within Canada.

• Do not charge QST unless the customer has a Quebec registration or delivery occurs in Quebec.

B. Exports and Zero-Rated Sales

• GST and QST are not charged on exports outside Canada, but you must keep shipping and customs documentation to prove zero-rating.

C. Digital or Online Sales
Non-resident suppliers selling to Quebec consumers must register under the Specified QST System and collect QST on online sales.

D. Combined GST/QST-Inclusive Pricing
Retailers may display prices inclusive of taxes but must show the breakdown on the receipt.

Common Errors and How to Avoid Them

• Calculating QST only on the base price (not including GST).

• Forgetting to update invoice templates when rates change.

• Not including tax registration numbers.

• Applying taxes to exempt sales (e.g., medical or financial services).

• Charging QST to customers outside Quebec.

Learning Insight

Every incorrect invoice creates downstream issues for clients claiming ITCs/ITRs. Double-check your math — errors can accumulate into serious assessment adjustments.

Real Quebec Business Examples

• A Montreal design studio charged QST incorrectly on out-of-province services and was reassessed $3,800.

• A café rounded taxes improperly, creating cumulative variances on 2,000 transactions.

• An online vendor failed to charge QST under the new digital sales rule and had to pay the difference with interest.

Lesson: precise invoicing prevents costly adjustments later.

Compliance Checklist

Do

• Calculate GST (5%) first, then QST (9.975%) on the total including GST.

• Include both GST and QST numbers on every invoice.

• Keep copies of invoices for six years.

• Verify customer location before deciding which tax applies.

• Update invoicing software regularly.

Don’t

• Charge QST to out-of-province customers.

• Forget to record GST/QST separately in your books.

• Assume e-commerce platforms automatically remit taxes for you.

• Issue handwritten invoices without registration numbers.

Mackisen Strategy

Mackisen CPA Montreal ensures every client uses accurate, compliant invoicing practices. We:

1. Set up automated invoice templates with correct tax rates.

2. Review tax registration details for clients and vendors.

3. Train bookkeepers to recognize exemptions and zero-rated sales.

4. Reconcile GST/QST reports monthly to prevent audit risks.

With Mackisen CPA, every invoice you issue is audit-proof, compliant, and optimized for ITC/ITR recovery.

Why Mackisen

With over 35 years of combined CPA experience, Mackisen CPA Montreal helps Quebec businesses stay compliant with Revenu Québec and CRA. From registration and invoicing to audit support and refund optimization, we protect your business with professional precision.