GST/HST and crypto in Canada: paying with crypto, selling it and mining

Most of the talk about crypto tax in Canada is about income tax: capital gains and business income. But crypto also meets the GST/HST, the federal sales tax and its harmonized version in some provinces. It matters if you run a business that accepts crypto, if you sell crypto as part of a business, or if you mine.

This guide explains what the CRA says about crypto as a payment, sales of crypto, mining, and when a business has to register. For income tax, see crypto tax in Canada.

Accepting crypto as payment

If you’re a GST/HST registrant and a customer pays you in crypto, the sale of your goods or services is treated as usual: if it’s taxable, GST/HST applies. The CRA’s point is about value: you must calculate the value of the crypto for GST/HST purposes based on its fair market value at the time of the transaction.

The CRA also says to keep all records that show how you calculated that fair market value, such as the exchange rate you used and where it came from.

For the customer, paying in crypto is also a disposal for income tax purposes, which can create a capital gain or loss. See spending crypto and tax.

Selling crypto: usually exempt

The GST/HST rules use the term virtual payment instrument, defined in the Excise Tax Act. According to the CRA:

• When you sell crypto that qualifies as a virtual payment instrument, the sale is an exempt supply of a financial service, and GST/HST doesn’t apply to it.
• The CRA gives bitcoin, ether and litecoin as examples.
• If a crypto-asset doesn’t meet the definition, the sale is likely a taxable sale of intangible personal property, and GST/HST may have to be collected.

So the GST/HST question for a business selling crypto is first of all what it’s selling. A business that sells tokens outside the definition should check the rules carefully, or ask the CRA.

Mining: deemed not to be a supply

Special rules for mining, in section 188.2 of the Excise Tax Act, took effect on 5 February 2022. The CRA’s GST/HST Notice 324 explains them.

What counts as mining. A mining activity includes validating transactions for a crypto-asset and adding them to a public distributed ledger, maintaining such a ledger, or allowing your computing resources to be used for those purposes. A mining payment is the fee, reward or other payment received or generated because of that activity.

The general rule. The provision of a mining activity, and the mining payment, are deemed not to be a supply for GST/HST purposes. In practice:

• miners don’t collect GST/HST on their mining;
• they can’t claim input tax credits for the GST/HST on related expenses, such as equipment and electricity, even when they don’t earn anything.

The exception. The general rule doesn’t apply when the mining activity is performed for a person whose identity is known, under conditions set out in the notice. In that case, the miner may be making a taxable supply to that person, collecting GST/HST and claiming input tax credits.

For the income tax side of mining, see bitcoin mining explained and crypto tax in Canada.

When a business has to register

The usual GST/HST registration rule applies to businesses that deal with crypto. According to the CRA’s general guide for registrants:

• You’re a small supplier if your revenue from worldwide taxable supplies is $30,000 or less in a single calendar quarter and over the last four consecutive calendar quarters.
• Once you go over $30,000 in either test, you’re no longer a small supplier and must register.
• Small suppliers engaged in a commercial activity in Canada can choose to register voluntarily.

Exempt supplies, such as sales of virtual payment instruments, aren’t taxable supplies, so they don’t count towards the $30,000 in the same way. Mining payments covered by the general rule aren’t supplies at all.

Three situations

What it means for you

• Individual investors buying and selling bitcoin or ether through a platform: the sale of a virtual payment instrument is exempt, so GST/HST isn’t something you deal with. Your concern is income tax on gains.
• Freelancers and contractors paid in crypto: if you’re registered for GST/HST, charge it on your taxable services as usual, valuing the crypto at fair market value when you receive it. The crypto is also income for income tax. See getting paid in crypto.
• Shops and online sellers that accept crypto: same as above, and keep a record of the rate used for every payment.
• Miners: under the general rule, nothing to collect and no input tax credits on mining costs, unless the exception for mining for a known person applies.

Records to keep

Whether you’re accepting crypto, selling it or mining, keep:

• the date, amount and fair market value in Canadian dollars of each crypto payment, and the source of the rate;
• invoices and receipts for the goods and services sold;
• records of mining payments and expenses, even though input tax credits generally can’t be claimed.

The CRA’s record-keeping guidance for crypto applies to income tax too. See how to report crypto on your Canadian tax return.

GST/HST rules can be technical, especially for mixed businesses and for tokens that may not be virtual payment instruments. If you’re unsure, check the CRA guidance linked below or ask the CRA for a ruling.