The 8% that comes off at the register
Ontario funds a point-of-sale rebate of the provincial part of the HST on qualifying children's goods, so a kids' tee is effectively taxed at 5% while the same design in adult sizing carries 13%. The store gives the credit at the till; the customer never sees the 8%. Qualifying children's clothing runs up to and including girls' size 16 and boys' size 20, or garments sized small, medium and large for children; children's footwear qualifies up to and including size 6; diapers qualify too. Costumes and sport-specific gear are carved out.
| On the rack | What the customer pays |
|---|---|
| Girls' tee, size 14 | 5%: the rebate applies |
| Boys' winter jacket, size 18 | 5%: the rebate applies |
| Children's runners, size 5 | 5%: the rebate applies |
| The same hoodie in adult small, bought for a teen | 13%: sizing decides, not the wearer |
| Child's costume | 13%: costumes are excluded |
| Child's soccer cleats | 13%: sport-specific footwear is excluded |
The return has to match the register. The CRA accepts two ways to account for rebated sales: report only the 5% you actually collected, or report the full 13% and claim an offsetting adjustment for the credits given. Either works; drifting between methods, or a POS that flags SKUs inconsistently, does not. We review the tax tables before we file, because a toddler tee set up at 13% means over-collected tax that still must be remitted, and an adult hoodie set up at 5% means the missing 8% comes out of your margin when the CRA finds it.
Gift cards: tax at redemption, not at sale
Selling a gift card is not a taxable supply, so no HST applies when the card leaves the store in December. The tax happens at redemption, at whatever rate the purchased items carry, including the 5% effective rate on qualifying kids' pieces. Refunds run the same logic in reverse: refund the HST with the price, then claim the offsetting adjustment on the return for the period the refund happened. Boutiques feel this every January, when December gifts come back after the quarter that produced the tax.
December's HST is January's bill
The HST collected through the holiday run is not the store's money, and for a quarterly filer it leaves in one payment a month after the quarter closes, exactly when clearance margins are thinnest. We set a collected-tax habit, moved weekly to a separate account, so the remittance is a transfer instead of a scramble. The kids'-clothing rebate helps here in a small way: correctly flagged children's stock means you were only ever holding the 5%.
The buying side of the return
What you remit is net of the tax you paid to operate, and a boutique pays plenty: 13% on rent, on wholesale invoices from Canadian brands, on freight, on the agency that shot the lookbook. Every dollar of it is an input tax credit when the paperwork is kept. Stock bought directly from foreign labels is different in a useful way: customs duty is a real cost that belongs in landed cost, but the 5% GST charged at the border is recoverable on the same return, so it should never be buried in the price of the goods. Missed ITCs are the quietest overpayment in retail, and we sweep for them before each filing.
The T2 behind the storefront
The corporate return leans on one figure more than any other: closing inventory. It comes from the count and the costing, it sets cost of goods sold, and it moves taxable income dollar for dollar, which is why we tie it to the aged-stock file rather than accepting a rolled-forward guess. Around it sit the CCA claims on fit-out and fixtures and the small-business deduction that taxes the first $500,000 of active profit at roughly 12.2% in Ontario. Our Corporate Tax Filing work files the T2 and the HST returns from the same reconciled books, and Personal Tax Filing puts the owner's T1 in the same hands, with salary or dividends already reconciled to the corporate side.
When the CRA asks about a retail file
Retail HST returns draw pre-assessment questions, and a boutique's answers live in its till data: Z-reports, the rebate accounting method, the refund log and six years of records. When a letter arrives, CRA Audit & Review Support responds with reconciliations that already exist instead of ones assembled against a deadline. Most letters end quietly when the paper is ready, and a Mississauga boutique whose filings we prepare has that paper by construction.
Source: Ontario — Harmonized Sales Tax.
