- Ontario's harmonized sales tax applies at 13% (5% federal plus 8% provincial) to most taxable goods and services, including, absent an available election, the sale of most business assets.
- Under section 167 of the federal Excise Tax Act, the buyer and seller can jointly elect to have no GST/HST apply to a qualifying sale of a business, or part of a business.
- To qualify, the buyer generally needs to be acquiring all or substantially all of the property necessary to carry on the business, or the relevant part of it, as a business.
GST/HST generally applies to the sale of most business assets in Ontario, and at the province's combined rate, that can mean a significant amount of tax changing hands at closing — a real cash-flow problem for a buyer who has to pay it and wait to recover it, and an administrative burden for a seller who has to collect and remit it. Federal tax law has a specific joint election that can avoid this altogether for a qualifying sale.
This article explains what the election does, the general test for qualifying, and where it doesn't apply.
As with any tax election, the details need to be confirmed with your accountant against the actual structure of your deal — this is background, not a substitute for that review.
Why HST Comes Up in a Business Sale
Ontario's harmonized sales tax applies at 13% (5% federal plus 8% provincial) to most taxable goods and services, including, absent an available election, the sale of most business assets. As of mid-2026 this rate has been unchanged for well over a decade, but always verify the current rate before relying on it. On a sizeable asset sale, that's real money changing hands at closing, even though the buyer generally expects to recover it eventually through its own HST filings.
The Election, in Plain Terms
Under section 167 of the federal Excise Tax Act, the buyer and seller can jointly elect to have no GST/HST apply to a qualifying sale of a business, or part of a business. Instead of the seller charging HST and the buyer paying it and later claiming it back, the transaction simply closes without HST changing hands on the assets covered by the election, avoiding the cash-flow drag entirely.
The Qualifying Test: "All or Substantially All"
To qualify, the buyer generally needs to be acquiring all or substantially all of the property necessary to carry on the business, or the relevant part of it, as a business. There is no fixed percentage written into the legislation that defines "substantially all" — it's judged on the facts of the specific sale, and courts have looked at this question differently depending on what's actually being transferred. Don't assume a specific asset sale qualifies just because it feels like "most" of the business; confirm it with your accountant or tax lawyer before you rely on the election, not after.
What Doesn't Need (or Get) This Election
| Situation | Why |
|---|---|
| Share purchases | Already generally exempt from GST/HST as a sale of shares — the election is irrelevant. |
| Sale of a few standalone assets, not a going-concern business | Likely doesn't meet the "all or substantially all" test, so ordinary HST rules apply. |
| Sales where the parties don't jointly elect | HST applies in the ordinary way even if the sale might otherwise have qualified — the election has to actually be made. |
Practical Steps Around the Election
- Identify early whether the deal is likely to qualify — this affects both pricing conversations and cash-flow planning for the buyer.
- Address it in the purchase agreement, including which party is responsible for confirming eligibility and completing the required filing.
- Confirm both parties are registered for GST/HST purposes where required, since the election generally depends on both being registrants.
- Don't assume it applies to a partial deal — if the buyer is only taking some of the business's assets, get specific advice on whether the remaining transferred assets still meet the test.
Frequently asked questions
Does the HST election apply automatically if the sale looks like a going concern?
No. It's a joint election that the parties have to actually make — it doesn't happen automatically just because the transaction feels like a going-concern sale.
What happens if we assume the election applies and we're wrong?
Getting this wrong can mean an unexpected HST liability turning up after closing, sometimes with interest. This is exactly why the "all or substantially all" test needs to be confirmed in advance rather than assumed.
Does this election matter for a share purchase?
Not really. A share sale is already generally treated as an exempt supply for GST/HST purposes, so the section 167 election is specific to asset sales.
Does real property in the sale change the analysis?
Real property can bring in Ontario land transfer tax considerations separate from HST, so a deal that includes real property needs both issues addressed, not just the HST election.
This is a business purchase or sale question
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