GST/HST on card processing fees, terminal rental and POS software in Canada

In general, the core card processing fees a merchant pays (the discount rate and per-transaction fees for processing payments) are treated as exempt financial services for GST/HST, so no GST/HST is usually charged on them. Terminal rental, terminal purchases, POS software subscriptions and many other non-financial services are generally taxable, so GST/HST (and QST in Quebec, or PST in some provinces) appears on those lines. The classification of individual fees can be technical, so read your statement line by line, ask your processor how each item is taxed, and confirm with the Canada Revenue Agency (CRA) or your accountant.

This guide is part of the fees and rules section. It explains general principles, not a tax ruling.

Why some fees are exempt and others are taxable

Under the Excise Tax Act, a supply of a financial service is generally exempt from GST/HST. The definition of financial service includes things like transferring money and handling payment instruments, but it also excludes a long list of services, including many administrative and technical services. Merchant processing fees for handling card payments have generally been treated as exempt. Equipment, software and services that are not themselves financial services are taxable.

At the network level, Budget 2023 amended the definition of financial service (Excise Tax Act s. 123(1), paragraph (r.6), for amounts due or paid after 28 March 2023) to make clear that payment card clearing services supplied by a payment card network operator are excluded, so they generally remain subject to GST/HST. That change concerns fees between networks and the banks and acquirers that use them. It does not by itself make a merchant's discount fees taxable, but it shows how fine the lines are.

How lines typically appear

Which tax rate appears

Taxable items carry the rate for the place of supply. As examples (check the CRA for current rates): GST 5% in Alberta, the territories, and in British Columbia, Saskatchewan and Manitoba (which add provincial sales tax on some items under their own rules); HST 13% in Ontario; HST 14% in Nova Scotia since 1 April 2025; HST 15% in New Brunswick, Newfoundland and Labrador and Prince Edward Island; and in Quebec GST 5% plus QST 9.975%.

Worked example (illustrative). An Ontario merchant rents a terminal for $30 a month and pays $18 a month for POS software. Taxable subtotal: $48. HST at 13%: $6.24. Monthly total: $54.24, or $650.88 a year. The $260 of processing fees on the same statement carry no HST in this illustration.

Input tax credits

If your business is a GST/HST registrant, you can usually claim input tax credits (ITCs) for the GST/HST paid on taxable inputs used in your commercial activities, such as terminal rental and POS software. For a registrant, the tax on these items is mostly a cash-flow cost, not a final cost. Keep invoices that show the supplier's GST/HST registration number; the CRA sets the information required for an ITC claim depending on the amount.

Exempt processing fees carry no GST/HST, so there is nothing to claim on them. If your own business makes exempt supplies (for example, some health services), your ITC entitlement may be limited; ask your accountant.

Buying versus renting: the tax angle

When you buy a terminal, the tax is paid once on the purchase price. When you rent, tax is paid on each payment. For a registrant claiming ITCs, the difference is mostly timing. For a non-registrant (for example, a small supplier below the registration threshold that has not registered), the tax is a real cost and should be included in the buy vs rent payback calculator. Read terminal rental versus purchase.

For income tax, processing fees, terminal rental and software subscriptions are generally deductible business expenses. A purchased terminal is generally a capital cost claimed through capital cost allowance rather than deducted in full in one year; ask your accountant about the class and any accelerated rules.

Checking your statement

1. Find the tax lines on your monthly statement or the processor's invoice.
2. Match each tax amount to the fee lines it applies to.
3. If tax appears on processing fees, ask the processor in writing why.
4. Make sure the processor's GST/HST (and QST) registration number appears.
5. Record taxable fees and the tax separately in your books so ITCs are claimed correctly.

FAQ

Do I charge GST/HST on a credit card surcharge?

Generally not. The CRA's info sheet GI-200 (Application of the GST/HST to Credit Card Surcharges) says that a surcharge disclosed before the transaction, which the customer can avoid by paying another way, and which is shown and charged separately from the price and other fees, is generally treated as a separate supply of a financial service, so no GST/HST applies to the surcharge itself. If it is not shown and charged separately, that treatment may not apply; ask your accountant. Surcharges are not allowed in Quebec.

Is a terminal lease taxed differently from a rental?

Both are generally taxable supplies of property or services, with tax charged on payments. The contract terms matter for income tax treatment; ask your accountant.

My processor is outside Canada. Does that change anything?

Possibly. Imported services and registration of non-resident suppliers have their own rules. Ask the CRA or an accountant.

Sources

• Canada Revenue Agency — GST/HST rates, financial services, input tax credits
• CRA GI-200: Application of the GST/HST to Credit Card Surcharges — surcharges as a financial service
• Department of Finance Canada — Budget 2023 tax measures (payment card clearing services)
• Justice Laws Website — Excise Tax Act
• Revenu Québec — QST