When it comes to sales tax in Canada, it’s rarely as simple as ticking a box and moving on. If you’re running a service-based or tourism business, understanding how to set up provincial GST/HST rates in your booking and accounting software can be the difference between a smooth tax season and a costly audit.
Many businesses assume that GST applies uniformly across Canada, but the reality is far more nuanced. With different provinces applying different combinations of GST, HST, PST, QST, and even tourism-specific levies, your accounting and booking software needs to be configured carefully , especially if you’re serving customers across provincial lines.
In this guide, we’ll walk through how to configure taxes properly in platforms like QuickBooks, Xero, FareHarbor, Checkfront, Square, and Shopify. More importantly, we’ll help you avoid the compliance traps that too many Canadian business owners fall into. Let’s make your systems work for you , not against you.
Why Setting Up Provincial GST/HST Rates Matters More Than Ever
Canada’s tax system is unique in how it splits authority between federal and provincial levels. And for tourism and service-based businesses, this creates a tangle of rules , especially when services span multiple provinces.
You may be based in British Columbia but run seasonal excursions in Alberta, or ship products to Ontario. Each of those provinces requires different tax treatments, and if your software doesn’t reflect that properly, you risk mischarging your customers , or misreporting to CRA.
In fact, CRA has become increasingly focused on auditing businesses that collect taxes across provinces but fail to remit them accurately. If you undercharge a guest or misclassify the service location, you may still owe the full amount, penalties included.
This is why a strong tax setup inside your accounting and booking tools isn’t just about compliance , it’s about financial protection. Configuring your software to reflect accurate Provincial GST/HST Rates helps ensure you remain fully compliant across all jurisdictions.
If you’re navigating similar complexity in your payroll, check out our guide on Navigating Canadian Payroll Regulations: Compliance Tips for Businesses.
Place of Supply: The Rule That Drives Everything
Perhaps the most misunderstood part of Canadian tax law is the place of supply rule. It determines which province’s tax rate applies , not based on where your business is located, but where your service is delivered.
Let’s say your business operates in Vancouver, BC. If you host a guided tour in Alberta, you’re expected to charge only 5% GST , not BC’s 12% combined GST and PST. Conversely, if you sell merchandise from BC to a customer in Ontario, you must collect 13% HST.
In-person services typically go by the location where the service takes place. Remote or digital services are based on where the customer resides. This is especially important for online services, webinars, or downloadable products sold nationally.
It’s essential your software supports flexible tax settings by product, province, and sometimes even by transaction type.
Tourism Levies and Regional Add-Ons: The Hidden Layer
Many tourism businesses are caught off guard by extra regional taxes such as MRDT in BC or the lodging tax in Quebec. These are not included under CRA’s jurisdiction, which means they must be registered, collected, and remitted separately.
For example:
- In BC, the Municipal and Regional District Tax (MRDT) adds up to 3% on short-term accommodations. It requires separate registration with the province.
- In Quebec, there’s a 3.5% lodging tax, along with 9.975% QST and 5% GST. All three are separate and may need to be handled with distinct tax accounts.
- Alberta charges a 4% tourism levy on temporary accommodation. Even though Alberta doesn’t charge PST, this tourism levy still applies.
For many operators, these extra provincial taxes further complicate how Provincial GST/HST Rates are applied in software systems. These tax layers must be manually configured in most accounting software , they won’t appear by default.
Setting Up Tax Rates in QuickBooks and Xero
In QuickBooks Online, setting up sales tax begins with selecting your home province. The platform will auto-apply basic tax rules (like GST or HST), but if you’re selling across multiple provinces, you’ll need to manually add each rate.
Let’s say you’re a BC-based lodge owner. You’ll want to create three separate tax rates:
– GST at 5%
– PST at 8%
– MRDT at 2–3% (configured as a custom code)
Each must be correctly labeled and tagged to specific services, like lodging or bundled packages. QuickBooks Online and Xero allow customization, but careful mapping of Provincial GST/HST Rates to the right services is key for clean reporting
In Xero, the process is a bit more manual. Navigate to your Advanced Tax Settings and create distinct codes for each province you serve. You’ll also want to assign those codes to your service items and ensure your invoicing templates reflect the correct breakdown.
If you’re still evaluating platforms, take a look at our review of the Top accounting software for businesses in Vancouver, it breaks down the features that matter most for small business owners.
Booking Software: Don’t Assume It’s Tax-Smart
Whether you’re using FareHarbor, Checkfront, Lodgify, or another tourism platform, it’s crucial to remember: these systems don’t automatically understand Canadian tax laws. That’s why many operators struggle with properly applying Provincial GST/HST Rates on these platforms without manual setup.
For example, in FareHarbor or Checkfront:
- You’ll need to create separate tax rules for GST, PST, and MRDT.
- These rules must be assigned individually to each service you offer.
- Exempt services, like children’s tours or school excursions, should be assigned a zero-rated code.
A key point, if you’re using Airbnb or Booking.com, find out whether the platform is collecting and remitting taxes on your behalf. In most provinces, they do, but only for bookings made through them. For direct bookings, the responsibility falls on you.
For those exploring better systems, here’s a helpful post on Shopify Bookkeeping Best Practices, especially if you’re combining physical and digital sales.
Setting Up GST/HST in Shopify, Hostaway, LMPM, and VRBO
Different booking and eCommerce platforms require different methods to apply Canadian sales taxes correctly. Let’s break down how to configure tax rates in some of the most commonly used systems by tourism and short-term rental operators.
Shopify
Shopify is widely used for both physical and digital products, but it doesn’t automatically apply provincial tax rules correctly unless configured manually.
- Navigate to Settings > Taxes and duties
- Select Canada and enable manual tax configuration
- Add each tax rate (GST, HST, PST) by province
- If you’re shipping physical products, set the destination province as the tax determinant
- Use tax overrides for products like gift cards, downloadable guides, or zero-rated services
Note: If you’re selling to multiple provinces, Shopify’s tax override by product type feature is essential to avoid incorrect tax charges.
Hostaway
As a popular PMS (Property Management System), Hostaway supports regional tax settings but requires manual setup.
- Go to Listings > Taxes and Fees
- Set up each tax type: GST, PST, MRDT, or HST
- Use the “add separate fee” option to itemize MRDT or tourism levies
- Apply different tax rules per listing, especially if your properties are in more than one province
Keep in mind: Hostaway does not remit taxes — you are still responsible for remittance to CRA and the province.
LMPM (Luxury Mountain Property Management)
LMPM is designed for high-end vacation rentals and supports detailed tax customization:
- Open the Tax Settings section under Account Setup
- Input the tax rates by province, including layered tax items (e.g., GST + PST + MRDT)
- Ensure each listing reflects its own provincial tax structure
- Use built-in reporting to track taxable revenue by province — this is helpful for CRA filing
Tip: LMPM offers custom tax codes for promotional offers or long-term stays that might be exempt or taxed differently.
VRBO
VRBO sometimes collects and remits taxes automatically depending on province, but it’s not consistent across Canada.
- Review your Payout Settings > Taxes Collected and Remitted
- For provinces where VRBO doesn’t handle remittance, manually add required taxes to your pricing or fees
- Clearly label tax amounts in your listing to stay transparent with guests and compliant with local tax laws
It’s critical to know when VRBO collects on your behalf and when it doesn’t. For example, in BC, MRDT is your responsibility — VRBO doesn’t remit it.
Why This Matters
Many operators assume that platforms will “just handle it” — but that’s rarely the case. Each system has quirks, and unless you’ve verified tax collection, your business could be undercharging (or overcharging) guests, leading to remittance issues later on.
Mobile POS Systems: Easy to Overlook, Easy to Mess Up
If your business runs from a food truck, mobile kiosk, or seasonal event tent, your point-of-sale system might be the only touchpoint where tax gets applied. That’s why systems like Square or Clover must be correctly programmed with the destination province’s tax rate , not just your home province.
In Square, for instance, you can add custom tax rates under the “Taxes” section. But you need to manually create different rates for each province if you’re crossing borders. If you’re serving BC one week and Alberta the next, this needs to be reflected in real time in your POS system.
Avoid These Common Filing Mistakes
One of the most common mistakes we see is businesses filing PST or QST through CRA , which is incorrect. These provincial sales taxes are handled entirely outside the CRA system and require separate tax numbers and filing portals.
For PST (in BC, SK, MB) or QST (in Quebec), you’ll need to:
- Register with the provincial tax authority
- Maintain separate remittance schedules
- Track sales and taxes independently from your federal GST/HST filings
The CRA doesn’t manage these taxes, and filing them through your federal system can lead to penalties or misapplied payments.
Need help with multi-province compliance? Our post on Double-Entry Bookkeeping can give you a framework for better tracking.
How to Handle Gift Cards and Gift Certificates
There’s a surprisingly big difference between gift cards and gift certificates when it comes to tax treatment:
- A gift card loaded with a cash value (e.g., $100) is not taxed at purchase. You collect tax when the card is redeemed.
- A gift certificate for a specific service (like “Two-night stay in Tofino”) may need to be taxed at the time of purchase, depending on how specific the service is.
If you’re offering both types, your booking or POS system should allow you to distinguish between them. If not, this is worth customizing , the consequences for doing it wrong can accumulate fast.
For more on tax-smart gifting, read our article on Tax Implications of Giving Gifts to Your Clients.
Being Audit-Ready: Keep the Right Paper Trail
Tax compliance isn’t just about charging the correct rate , it’s also about documenting it.
During an audit, the CRA or provincial tax authorities may request:
- Screenshots of your tax configurations
- Invoices showing provincial breakdowns
- Proof of tax collected and remitted by third-party platforms (e.g., Airbnb)
- Sales records by province, especially for digital goods or mobile operators
Make a habit of downloading reports monthly from your booking and accounting platforms and saving them in a central folder. CRA requires businesses to retain tax documentation for at least 6 years.
Need a refresher as you wrap up your fiscal year? Check out The Year-End Accounting Checklist for Small Business Owners.
FAQs About Provincial GST/HST Setup
Below are some common questions we hear about configuring Provincial GST/HST Rates correctly across provinces and platforms.
Do I need to register separately for PST or QST?
Yes. GST and HST are handled federally through CRA, but PST (in BC, SK, MB) and QST (in Quebec) require separate registration and remittance to the respective province.
What is the place of supply rule?
It determines which province’s tax rate to apply based on where the service is delivered. This rule is central to correctly charging GST, HST, or PST.
Do platforms like Airbnb remit MRDT or PST for me?
Usually yes , but only for bookings made through their platform. Direct bookings still require you to collect and remit these taxes yourself.
What tax should I apply for a virtual consultation with a customer in Ontario?
Assuming the service is delivered remotely, Ontario’s tax rate applies , that means 13% HST.
Is MRDT collected by CRA?
No. MRDT is a provincial tax in BC and must be registered, collected, and remitted separately.
What happens if I charge the wrong tax rate?
You’re still liable to remit the correct amount. Undercharging a customer doesn’t exempt you from paying the full tax , the difference comes out of your pocket.
Final Thoughts
Setting up provincial GST/HST rates in your accounting and booking software might not feel like the most exciting part of running your business , but it’s one of the most important. Whether you’re charging the 5% GST in Alberta or a mix of GST, PST, and MRDT in BC, accuracy matters. That accuracy starts with a reliable setup of Provincial GST/HST Rates inside your accounting and booking systems.
The good news? With the right tools and a bit of thoughtful configuration, your software can do most of the heavy lifting. Better yet, your tax filings will be smoother, more accurate, and less stressful.
And if you’re feeling overwhelmed, you’re not alone. At Valley Business Centre – Bookkeeping & Payroll, we work closely with Canadian business owners, particularly those in the tourism and service industries , to help simplify the tax setup process. Whether it’s configuring GST/HST properly across multiple provinces, managing separate remittances for PST or MRDT, or ensuring your software platforms are aligned with CRA expectations, we bring clarity to what often feels like a complex and confusing process.
We understand that every business is different. That’s why we tailor our support to your specific needs , whether you’re just getting started, expanding your offerings, or cleaning up past records. If you’re not confident in your current configuration of Provincial GST/HST Rates, now is the time to review and fix it. Our goal is to make sure you stay compliant, avoid costly mistakes, and spend less time worrying about tax, and more time doing what you do best.
