Do I charge GST/HST when I sell my business in Canada?

This is one of the most common questions Canadian sellers ask, and the answer depends almost entirely on how the deal is structured. It is worth settling early, because the cash amounts involved are large enough to affect how a closing is funded.

Asset sale: taxable by default

In an asset sale the seller is supplying equipment, inventory, goodwill and other property, and most of that is a taxable supply. Without an election, the seller must collect GST/HST on the taxable portion and remit it. On a seven-figure sale that is a very large amount of money moving at closing.

What the section 167 election does

Where the conditions are met, a joint election allows the parties to treat the qualifying assets as transferring without GST/HST applying. Both parties must elect — one side cannot do it alone — and it must be filed within the required timeframe. The conditions broadly require a sale of a business or a part of a business capable of separate operation, with the buyer acquiring substantially all of the property needed to carry it on, and the buyer generally being a registrant.

Why buyers care even though they would recover it

A registered buyer would normally claim the tax back as an input tax credit, so in principle it washes out. In practice the buyer has to find the cash at closing and wait to recover it, which can mean financing an amount that was never part of the purchase price. Lenders do not always fund it. That timing gap alone is enough to strain a deal that was otherwise fully funded.

What the election does not cover

• It does not apply to a share sale, which does not need it
• Certain supplies remain taxable notwithstanding the election
• Real property has its own rules and its own considerations
• It does not remove other taxes — provincial land transfer tax, for example, is separate