GST/HST and Payment Processing Fees in Canada

Which Processing Fees Are GST/HST-Exempt?

Under Canada's Excise Tax Act, "financial services" are exempt from GST/HST. Credit card processing — the actual movement and settlement of funds — qualifies as a financial service.

This means the core processing fees you pay on each transaction are GST/HST-exempt. You don't pay tax on them, and you don't claim Input Tax Credits (ITCs) for them.

Exempt Fees (No GST/HST)

• Interchange fees (the fee paid to the card-issuing bank)
• Card network assessment fees (Visa/Mastercard network fees)
• Per-transaction processing fees (the percentage + flat fee your processor charges)
• Chargeback fees (in most cases)
• Currency conversion fees on transactions

Taxable Fees (GST/HST Applies)

• Monthly account fees ($24.95/month Moneris fee = taxable)
• Terminal rental fees ($49.95/month terminal lease = taxable)
• PCI compliance fees ($9.95/month = taxable)
• Gateway access fees (monthly software fees)
• Statement fees
• Setup fees
• Hardware purchases (card readers, terminals)
• POS software subscriptions

How This Affects Your Processor Choice

Processors with high monthly fixed fees generate more taxable charges. A Moneris merchant paying $24.95/month + $49.95 terminal rental + $9.95 PCI fee = $84.85/month in taxable fees. In Ontario (13% HST), that's an extra $11.03/month — $132/year in tax on fees alone.

Helcim has $0 monthly fees and no terminal rental. The $99 card reader purchase is taxable, but it's a one-time cost.

Stripe has $0 monthly fees. Both generate almost no taxable fee charges.

Claiming ITCs on Taxable Fees

If you're a GST/HST registrant, you can claim Input Tax Credits on the taxable fees. The HST you pay on terminal rentals, monthly fees, and hardware purchases is recoverable on your GST/HST return.

Keep your processing statements — they serve as documentation for ITC claims. Most processors include a GST/HST summary on monthly statements showing the tax-exempt and taxable portions separately.

Collecting Provincial Sales Tax from Customers

Canada's sales tax system is a patchwork. Your payment gateway needs to handle different rates depending on where your customer is located (for e-commerce) or where your store is (for in-person).

How Each Processor Handles Tax

Square: Automatically calculates and applies the correct tax based on your store location (in-person) or customer address (online). Handles PST, HST, GST, and QST.

Generates tax-compliant receipts. This is Square's strongest feature for Canadian merchants.

Shopify Payments: Shopify handles Canadian tax calculation automatically. Knows all provincial rates and applies the correct one based on shipping address. Generates proper tax breakdowns on receipts and invoices.

Stripe: Does not calculate tax by default. You either code it yourself or add Stripe Tax — which costs an additional 0.5% per transaction. For a $100 sale, that's $0.50 extra on top of the 2.9% + $0.30 you're already paying.

Helcim: Handles tax calculation in its POS app and hosted checkout. You set your tax rates (or use built-in Canadian rates) and it applies them automatically.

Moneris: Terminal POS systems can be configured with tax rates. The Moneris Gateway for online doesn't handle tax calculation — that's your website's job.

E-commerce: Place of Supply Rules

For online sales shipped within Canada, you charge the tax rate of the province where the product is delivered — not where your business is located. A BC-based online store shipping to Ontario charges 13% HST, not BC's 5% GST + 7% PST.

This matters for your payment gateway setup. Your checkout system needs to determine the customer's province and apply the correct rate.

Platforms like Shopify handle this automatically. If you're using Stripe or Moneris with a custom-built store, you need to build this logic yourself.

If you want a practical merchant-first shortcut, run our Canadian Checkout Tax Wizard. It helps you sanity-check which provinces deserve federal-only logic versus GST + PST, GST + QST, or GST + RST setup.

For digital products and services (SaaS, downloads, streaming), place of supply is based on the customer's location. The same provincial tax rules apply.

US Processors and Canadian Tax

Stripe and Square are US companies. Their processing fees are charged by US entities. This raises a question: is there GST/HST on processing fees charged by a non-resident?

Under current CRA rules, non-resident suppliers providing financial services to Canadian businesses are generally not required to charge GST/HST on those services. Stripe does not add GST/HST to its per-transaction fees. Square does not either.

However, if a US processor charges you for taxable services (software subscriptions, add-on products), the "reverse charge" mechanism may apply — you may need to self-assess GST/HST on those charges. Consult your accountant on this.

Surcharging and Tax

Since October 2022, Canadian merchants can surcharge credit card transactions (up to the processing cost, max 2.4%). If you surcharge, the surcharge itself is subject to GST/HST.

Example: $100 purchase in Ontario with a 2.4% surcharge = $100 + $2.40 surcharge = $102.40 subtotal. HST applies to the full $102.40, not just the $100. The customer pays $102.40 × 1.13 = $115.71.

Practical Checklist

1. Separate exempt processing fees from taxable service fees in your bookkeeping
2. Claim ITCs on all taxable processing fees (monthly fees, terminal rentals, hardware, PCI fees)
3. Ensure your checkout collects the customer's province and applies the correct tax rate
4. If selling across provinces online, use a platform that auto-calculates provincial tax (Shopify, Square, or Helcim)
5. If using Stripe with a custom store, build or buy tax calculation — don't skip this
6. Keep monthly processing statements for your GST/HST filing
7. If you surcharge, apply GST/HST to the surcharge amount