Ontario Sales Tax for Contractors: How HST Works on Your Jobs

Short answer: Ontario has no separate provincial sales tax for contractors — it is an HST province, so a single 13% tax (5% federal plus an 8% provincial part) applies to your whole contract, labor included. A contractor is not the final consumer of materials: as a registrant you charge HST on the job and recover the HST you paid on supplies as input tax credits. Registration with the CRA becomes mandatory once taxable revenue passes $30,000 across four calendar quarters.

That is what makes Ontario simpler than the provinces west of it. In a PST province a contractor pays provincial tax on materials and never gets it back — a cost buried in the quote. In Ontario there is one tax, one registration and one return, and the provincial portion flows through you rather than sticking to you. Everything runs through the Canada Revenue Agency; there is no separate Ontario registration. Get the invoice mechanics right and this is routine — start with what to include on an invoice, and if the categories blur, invoice vs receipt.

Does Ontario charge HST on contractor labor?

Yes. This surprises contractors arriving from a GST-plus-PST province or a US state where services escape sales tax. In Ontario the supply of construction services is subject to HST at 13%, with no labor exemption to hunt for.

Component	Rate	Belongs to
Federal part (GST)	5%	Government of Canada
Provincial part	8%	Ontario
Combined HST	13%	Collected as one tax by the CRA

The federal 5% comes from section 165(1) of the Excise Tax Act, which requires every recipient of a taxable supply made in Canada to pay tax “calculated at the rate of 5%.” Section 165(2) then adds, for a supply made in a participating province, tax “calculated at the tax rate for that province.” Ontario’s published rate is 13%, so the provincial part is the 8% remainder. The Ontario government’s own summary is short on the split but clear on who runs it: “the Canada Revenue Agency (CRA) administers the HST.”

You charge that 13% on the contract, not a slice of it. Labor, materials, equipment time, disposal, travel: if it is part of what you supply, HST applies to it.

Am I the final consumer of my materials in Ontario?

No — the biggest structural difference between Ontario and a PST province.

You buy materials, pay 13% HST to your supplier, then claim it back as an input tax credit. Section 169 of the Excise Tax Act allows the credit for a reporting period “during which the person is a registrant,” to the extent the property or service was acquired “for consumption, use or supply in the course of commercial activities of the person.” Framing lumber for a customer’s job is about as clean a commercial-activity purchase as exists.

Step	Ontario (HST)	A PST province
Buying materials	Pay 13% HST	Pay provincial sales tax
Recovering it	Claim an input tax credit	Generally not recoverable
Billing the customer	Charge 13% on the full contract	No provincial tax on the service
Effect on your margin	Neutral	Embedded in your price

Under a PST model the tax charged at the supply house is a direct cost like freight or fuel: it has to be marked up with everything else and it never comes back. Ontario removed that step, which is why an Ontario bid and a British Columbia bid for identical work are not built the same way — British Columbia sales tax for contractors shows the other side of that line.

The consequence is a discipline, not a saving: your supplier receipts are money. Every unclaimed credit is 13% you paid and never got back.

When do I have to register for HST in Ontario?

Once you stop being a small supplier. Section 148 of the Excise Tax Act sets the test: you are a small supplier while the consideration for your taxable supplies does not exceed $30,000, measured over “the four calendar quarters immediately preceding the particular calendar quarter.” Three things trip people up:

• Revenue, not profit. A contractor billing $32,000 with $20,000 of materials is over the line.
• A rolling test. Four calendar quarters back, not your fiscal year — you can cross it mid-summer on one large job.
• Worldwide taxable supplies, not just Ontario revenue.

You can also register voluntarily below the threshold, and for a contractor that is usually right rather than merely tidy. Below it you charge no HST but claim no credits, so you eat the 13% on every material purchase, tool and truck expense. A newly registered contractor buying materials is often in a refund position.

How do I show HST on an Ontario contractor invoice?

The CRA expects a customer to see and verify the tax, and a commercial customer needs your registration number to claim their own credit. Your invoice should carry:

• Your business name and the invoice date
• Your GST/HST registration number — without it a business customer cannot claim a credit on what you charged
• A clear description of the work
• The amount before tax, the HST as a stated amount or the 13% rate applied, and the total payable

You do not need to break out the 5% and 8% parts. HST is one tax; show it as one line at 13%. Nor do you need to separate labor from materials the way a California contractor does, because both sit inside the same taxable supply. Itemize if it helps your customer approve the job, but never imply one line is taxed and the other is not.

New residential construction is the exception. It interacts with the GST/HST new housing rebate rules, and Ontario runs its own provincial-portion rebate on top of the federal one. Amounts, ceilings and eligibility windows move with budgets, so confirm current figures with the CRA before writing a number into a purchase agreement — the rebate is often assigned to the builder at closing, which puts any error on your side.

What does HST registration not cover?

HST registration does not make you compliant. Two provincial bodies matter.

WSIB. Ontario is unusually strict. The Workplace Safety and Insurance Board states that “independent operators, sole proprietors, some partners in a partnership and some executive officers who work in construction must have WSIB coverage” — so a one-person construction business here is not automatically outside the system as it would be in other provinces. Once you hire, you have “10 calendar days from the day you hire your first employee to register.” A narrow home renovation exemption runs through WSIB’s operational policy, which “applies to all decisions made on or after December 5, 2024, for all accounts.” It covers work “on an existing private residence that is, or will be occupied by, the person who directly retains” you, or a family member — and directly retained is defined tightly: hired by the occupant, invoicing the occupant in your own name, and paid by the occupant. Its key limit is stated outright: the exemption “does not apply to subcontractors retained by the contractor to perform construction work, as these subcontractors are not directly retained by the occupant or family member.”

ESA. Electrical contracting is licensed by the Electrical Safety Authority. To hold a Licensed Electrical Contractor licence you must “be a Master Electrician, or have at least one Master Electrician working for you at all times,” hold “an address for service in Ontario,” carry “public liability and property damage insurance coverage of at least $2,000,000,” be registered with WSIB where required, and be current with the Ministry of Finance and the CRA. A Master Electrician certificate alone does not let you contract — see Ontario contractor license requirements for the rest.

What records make HST filing painless?

The return is arithmetic: tax collected, minus credits you can substantiate. The second number gets adjusted downward on audit when receipts are missing. Ontario’s pass-through model is generous only to contractors who kept the paper — for the period the CRA requires, covered in how long to keep tax records.

Keel exists for that daily habit. It is an iOS app that runs entirely on your device: no account, no bank connection, no cloud sync, and an App Store privacy label reading “Data Not Collected.” Receipts are read on-device by Apple Intelligence, so a supply-house receipt is captured, dated and indexed in seconds without leaving your phone. Invoices go out as PDFs with your own numbering, logo and a QR code linking to payment, mileage is logged, and every entry lands in an append-only, hash-chained ledger that cannot be quietly rewritten. A year exports as a single file.

Keel is a record keeper, not a compliance tool. It does not register you for HST, calculate your credits, file a return with the CRA, register you with WSIB or sell you the $2,000,000 policy the ESA wants to see. It makes sure that when any of them asks what you billed and spent, the answer is complete and unedited. Keel is free for unlimited invoices, receipts and mileage; Keel Pro is a one-time $249.99 lifetime purchase, not a subscription.

Frequently asked questions

Do Ontario contractors charge HST on labor? Yes. Ontario applies one harmonized tax at 13% — 5% federal and 8% provincial — to the supply of construction services, with no exemption for the labor portion. Charge 13% on the full contract value, including labor, materials, equipment time and any other amounts you recover, not on the materials alone.

Is an Ontario contractor the final consumer of building materials? No. You pay 13% HST to your supplier, then recover it as an input tax credit under section 169 of the Excise Tax Act, to the extent the purchase was for use in commercial activities. That is the opposite of a PST province, where provincial tax on materials is generally unrecoverable and gets buried in your price.

When do I have to register for HST as a contractor in Ontario? Once your taxable supplies exceed $30,000 across the four calendar quarters immediately preceding the current one, under section 148 of the Excise Tax Act. The test is revenue rather than profit, and it rolls rather than following your fiscal year. Voluntary registration below the threshold is allowed and often worth it.

Do I need WSIB coverage if I work alone in Ontario construction? Generally yes. WSIB says independent operators, sole proprietors, some partners in a partnership and some executive officers working in construction must have coverage, so working alone is not by itself an exemption. A narrow home renovation exemption exists where the occupant of an existing private residence retains, invoices with and pays you directly, but not for subcontractors hired by a main contractor.

Is HST registration enough to work legally as a contractor in Ontario? No. HST registration is a federal tax matter administered by the CRA. WSIB coverage is separate and compulsory for most construction businesses. Regulated trades add their own gate: electrical contracting requires an ESA licence, a Master Electrician on staff at all times, and at least $2,000,000 in liability cover.

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This article is general information, not legal or tax advice. Rules change — confirm with the authority named above.