Growth & Customers

What the GST/HST holiday means for your business

Learn what the GST/HST holiday means for your business. Discover eligible items, compliance tips, and how Sage software simplifies tax adjustments.

Have you heard of the recent GST/HST holiday introduced by the Canadian Government?

This initiative, part of the “Tax Break for All Canadians Act,” temporarily removes GST and HST from select goods, aiming to reduce costs for consumers and stimulate spending during the holiday season.

As a small business owner, understanding the details of this tax break is key to staying compliant and maximizing its benefits.

From pricing adjustments to leveraging accounting tools, this article will guide you through what the GST/HST holiday means for your business and how Sage software can simplify the process.

Here’s what we’ll cover

What is the GST/HST holiday?

The GST/HST holiday is a government initiative in Canada that temporarily removes the Goods and Services Tax (GST) and Harmonized Sales Tax (HST) from certain essential and holiday-related goods.

The goal is to ease financial pressure on Canadians while encouraging spending on eligible items.

For small businesses, this creates both opportunities and challenges—from pricing adjustments to compliance requirements.

This temporary tax break runs from December 14, 2024, to February 15, 2025.

The initiative, known as the “Tax Break for All Canadians Act (Bill C-78)”, aims to provide financial relief to Canadians and stimulate the economy during the holiday season and into the new year.

What consumer goods are included in the GST/HST holiday?

Not every taxable item qualifies for the GST/HST holiday, so it’s important to understand which goods are exempt during this time period.

Eligible items include:

  • Food and beverages: prepared foods like sandwiches, salads, and pre-made meals. Snacks, coffee, tea, and even certain alcoholic beverages are also included.
  • Children’s products: clothing, footwear, toys, car seats, and diapers.
  • Books and printed materials: physical books and newspapers.
  • Children’s toys: educational toys designed for children under 14 years of age.
  • Gaming supplies: video-game consoles, controllers, and game cartridges or discs.
  • Holiday-specific items: Christmas trees and similar decorative trees.

For a complete list, refer to this Government of Canada Backgrounder posted on November 21, 2024.

How does the GST/HST holiday impact businesses?

The GST/HST holiday presents both opportunities and challenges for small businesses.

The biggest boost is the potential for higher consumer spending, benefiting retailers who sell eligible goods.

Consider promoting items that qualify for the exemption to drive traffic to your business.

As for the challenges resulting from the GST/HST holiday, here are some things to consider:

  • Adjusting prices: as a business, you’ll need to update your pricing on applicable products to reflect the temporary tax exemption. This not only ensures compliance but also maintains customer trust.
  • Inventory management: the demand for certain goods may fluctuate, making inventory management crucial.
  • Administrative updates: businesses must ensure their point-of-sale systems and accounting software are updated to reflect the tax changes accurately. This can be a time-intensive process, but it’s crucial to avoid discrepancies.
  • Customer communication: clear communication about the tax exemption is essential to avoid confusion.

Proactively adjusting pricing, leveraging promotional strategies, and ensuring your systems are updated, will help you comply with the new regulations.

You can also use this tax break to attract customers and boost sales during the holiday season.

Staying organized and informed is key to making the most of this temporary exemption.

Case study: How to record sales taxes for items that are temporarily exempt in Sage 50

Staying on top of your bookkeeping during this GST/HST holiday is essential.

In Sage 50, recording sales taxes for exempt items is straightforward.

Here’s how you can do it:

  1. Navigate to the Tax Settings in Sage 50.
  2. Create or modify a tax code to reflect the temporary exemption. You’ll want to make sure the GST/HST is set to 0%.
  3. Assign the updated tax code to the relevant products or services.
  4. Verify that invoices and receipts correctly reflect the tax-exempt status.

For detailed steps, check out this Sage 50 knowledge base article.

Case study: How to exempt GST or HST from purchases and sales with Sage Accounting

Sage Small Business Accounting makes it simple to handle temporary tax exemptions.

Follow these steps:

  1. Access the Tax Settings in your Sage Accounting dashboard.
  2. Adjust the GST/HST rates to apply a zero rate for eligible items.
  3. Update your product listings with the adjusted tax rates.
  4. Double-check that invoices and sales reports reflect the temporary exemption.

For a full walkthrough, visit this Sage Accounting knowledge base article.

Final thoughts

The GST/HST holiday presents a unique opportunity for businesses to attract customers while navigating the complexities of a temporary tax break.

By understanding the eligible items and updating your systems accordingly, you can ensure compliance and capitalize on increased consumer spending.

Sage software, including Sage 50 and Sage Accounting, can help streamline these adjustments, ensuring your records stay accurate and up-to-date.

Don’t let the GST/HST holiday catch you off guard—prepare now to make the most of this temporary tax break.