Is There a Tax on Car Insurance in Ontario?

You buy something; you get taxed. You sell something; you get taxed. Paying tax on goods is something that the residents of Ontario have become all too familiar with. At the time of writing this article, HST (harmonized sales tax) is 13% in Ontario. This means that residents need to tack on an additional 13% to the price of groceries, clothing, technology and practically everything else that they buy on a regular basis.

Notice how we said “practically everything”?

We did this on purpose — there are a handful of things that are exempt from HST in the province of Ontario. This leads to the question, “Is there tax on car insurance in Ontario, and if so, how much is it?”.

Continue reading to learn the answer to this interesting and nuanced question.

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As you most likely know, the province of Ontario has one of the highest average car insurance rates in Canada. The price of car insurance in Ontario is influenced by a number of factors, ranging from the age of its residents to the high accident rate.

This means that countless safe, responsible drivers are overpaying for car coverage.

If you feel like you’re paying too much for car insurance, you’ve come to the right place. At Surex, our main goal is to help you find the best, cheapest car insurance in the province. We reach this goal by teaming up with the best car insurance companies in Canada, which makes it easy for us to find high-quality plans and products.

Not to mention, our team is specialized and speedy — we can provide you with ten high-quality car insurance quotes in ten minutes or less (the number of quotes varies from province to province). Teaming up with Surex makes buying insurance a simple, frictionless experience for drivers in Ontario and across the country.

Have a conversation with one of our experienced insurance advisors today to learn how you can save up to 25% by bundling your policies with one of our partners.

Is there HST on car insurance in Ontario?

In short, no, drivers do not have to pay HST on car insurance in Ontario. The price that you see is the price that you pay.

The next time you receive a quote from one of our licensed insurance advisors, you can remind yourself that you won’t have to add any additional HST-related fees to the amount. Doing this allows you to plan your budget like a pro. 

Additionally, you can put the money that you’d have otherwise spent towards things like winter tires, gas or eye-catching car modifications. The choice is yours!

Why is there no HST on car coverage in Ontario?

The primary reason that there’s no HST on car insurance is due to the fact that it’s viewed as a “financial service”. In Ontario, financial services are not classified as taxable.

Is there tax on auto insurance in Ontario?

Drivers don’t have to pay HST on car coverage in Ontario, but in some cases, they are required to pay RST (retail sales tax).

Ontario’s Ministry of Finance requires drivers to pay RST on their vehicles and insurance premiums in the following situations:

“Specified vehicles purchased privately within Canada from a person who is not a GST/HST registrant.”

and

“Premiums paid under taxable insurance contracts, group insurance, contributions paid into funded plans, benefits and certain payments made in respect of unfunded plans and qualifying trusts, and payments made into insurance schemes or compensation funds established by statute.”

What is a “GST/HST registrant”?

To clarify, a GST/HST registrant is an individual who is or needs to be registered for the HST/GST.

What is a “specified vehicle”?

In this context, a specified vehicle is as follows:

• Motor vehicles that require a permit for on-road usage (automobiles, motorcycles, trucks, buses, motorhomes, trailers, etc.)
• Off-road vehicles that need a permit for usage (snowmobiles, ATVs, UTVs, etc.)
• Aircraft
• Watercraft (sailboats, motorboats, etc.)

How much is RST in Ontario?

In Ontario, you are required to pay 13% on RST on specified vehicles that were purchased from a private seller who is not a GST/HST registrant. Additionally, you will need to pay 8% on RST on insurance products that meet the specifications listed above.

So, if you pay the average amount for car insurance in Ontario ($1,300 to $1,800 a year), you’ll pay approximately $104 to $144 for RST.

How do you pay RST fees in Ontario?

You can pay your RST at your local ServiceOntario. To be clear, do not pay the RST to the seller.

Are there any exemptions for RST tax on insurance premiums in Ontario?

Yes, there are certain situations where you may not need to pay RST on the vehicle or your insurance premiums. Some examples of these situations include:

• The vehicle is given to the driver as a gift
• You qualify as a Status Indian
• You qualify as a foreign representative
• The vehicle is a component of an estate bequest
• You are a registered motor vehicle seller with a valid Ontario Motor Vehicle Industry Council (OMVIC) Number and you are purchasing the vehicle with the intention of reselling it
• You are moving to Ontario and need to bring a vehicle that your purchased beforehand

Can you get an RST refund in Ontario?

In some cases, yes, you can get an RST refund. You can get an RST refund if you were charged the incorrect amount or you paid in error while transferring a car at your local ServiceOntario.

You can apply for a refund within four years of paying RST.

What have you learned about paying tax on car insurance?

As you now know, drivers do not have to pay HST for car insurance in Ontario. But, in some select cases, drivers do need to pay RST.

If you’d like to learn more or have unanswered questions about car insurance, don’t hesitate to reach out to a Surex insurance advisor. We’re more than happy to shed a bit of light on any topics that seem unclear.