When you offer discounts or run promotional sales, GST/HST is calculated on the price your customer actually pays, not the original list price. If you give a 20% discount before tax, you collect GST/HST on the discounted amount. This applies whether the discount is early-payment, volume-based, loyalty rewards, or a simple sale. The key is that the discount must be offered at the point of sale or clearly documented before the transaction is final. Many small business owners mistakenly think they should charge GST/HST on the full price and then deduct the discount afterward. That's not how the CRA views it. Instead, think of it this way: Original price: $100 Customer discount: 20% off Price customer pays: $80 GST/HST (5% or higher): calculated on $80, not $100 This approach keeps your accounting cleaner and aligns with how the CRA expects tax to be reported. The discount reduces the taxable amount, which in turn reduces the GST/HST you collect. Not all promotions work the same way under GST/HST rules. Here's what matters: Conditional Discounts (offered before purchase) If you advertise "20% off this weekend" or "Buy 2, get 1 free," the discount is part of the sale price.
You charge GST/HST on the discounted price, not the full list price. If you offer a 20% discount, calculate tax on the amount the customer actually pays after the discount is applied.
A cash rebate issued after the sale doesn't change the GST/HST already collected. The tax was calculated and collected on the original sale price. The rebate is a separate transaction.
Report the discounted price as your sales total, not the full list price. Your GST/HST and input tax credits are based on the actual amount charged and collected, which the discounted price reflects.
No. When you reduce the sale price through a discount, GST/HST automatically reduces too because it's a percentage of the sale price. If you want to absorb the discount cost, the customer still pays lower tax.
Yes. When a customer redeems loyalty points to reduce their purchase price, you calculate GST/HST on the reduced amount, just like a cash discount. The points represent consideration received for the reduced price.