Buying a Used Car in Canada: How to Legally Avoid Paying Sales Tax

Purchasing a car from a province like Alberta, which only charges GST, can reduce your tax burden. However, be aware that your home province may still require PST upon registration.

In provinces like Ontario and British Columbia, vehicles gifted to immediate family members (e.g., parents, children, spouses) can be exempt from PST, if the right documentation is completed.

If you buy a vehicle on a reserve from a registered First Nations individual, PST or HST may not apply. This must be a legitimate on-reserve transaction to qualify.

Self-employed individuals or businesses can claim input tax credits (ITCs) on the GST or HST paid, potentially offsetting some of the taxes paid on the vehicle.

Some provinces offer tax exemptions or rebates for electric or hybrid vehicles, or vehicles modified for accessibility. Check your province’s rebate programs for eligibility.

When you trade in a vehicle, you usually only pay tax on the price difference. For example, trading in a $5,000 vehicle on a $20,000 purchase means you pay tax on $15,000.

Some dealers may offer promotions that include tax in the advertised price or absorb part of it. Always confirm the terms and ensure the deal is transparent.