Do I need to pay taxes for renting a truck?
In Calgary and throughout the province of Alberta, truck rentals are subject to federal goods and services tax (GST). Alberta is one of the few provinces in Canada that does not have a provincial sales tax (PST) or harmonized sales tax (HST), making it one of the most tax-friendly provinces for consumers.
The current GST rate in Alberta is 5%, which applies to most goods and services, including vehicle rentals. This rate has remained unchanged since January 1, 2008, when it was reduced from the previous 7% rate. For truck rentals, this means that 5% GST will be added to the base rental cost.
Legal basis for vehicle rental taxation
Federal GST/HST rules
Under Canada's federal GST/HST rules, the rental of specified motor vehicles is taxable. When you lease a specified motor vehicle from a business that is a GST/HST registrant, you must pay GST/HST on your lease payments. This rule applies to all types of vehicles, including trucks, whether used for commercial or personal purposes.
The taxation rules depend on the length of the lease:
- Up to 3 months — GST/HST applies at the rate of the province where the vehicle is delivered or made available to the customer.
- Over 3 months — the rate is determined by the province where the vehicle is to be registered.
Specifics for trucks
Trucks used for moving or transporting goods are considered commercial for tax purposes, even if the lease is for personal use. This means that GST applies in all cases.
The Canada Revenue Agency determines that freight transportation services are taxable. In some cases, the rate may be zero, but standard GST is usually charged.
Calculating taxes when renting a truck
Basic formula
Freight carriers and their obligations
Freight carriers have complex tax obligations that depend on the nature of their services. Freight transportation services provided in Canada may be taxable at the provincial rate or may be zero-rated. If you are a GST/HST registrant, you must charge GST/HST on the amounts you charge for a taxable freight transportation service, unless the service is zero-rated.
Truck drivers face several types of taxes, including income tax, self-employment tax, and fuel tax. They must also comply with provincial income tax requirements, which vary by province, resulting in additional filing obligations.
Alberta provincial features
No provincial sales tax
Alberta is one of the few provinces in Canada that does not levy a provincial sales tax (PST). This makes truck rental in Calgary relatively cheaper compared to other provinces where both GST and PST or HST apply. For example, Ontario has a 13% HST, while Alberta only requires 5% GST.
Tourist tax
Although there is no PST in Alberta, there is a 4% tourist tax on accommodation. This tax, formerly known as the hotel room tax, was originally 5% before being reduced to 4% on April 1, 2005. However, this tax does not apply to vehicle rentals, including trucks.
With the introduction of the 2024-2025 budget, online vacation rental platforms such as Airbnb and Vrbo must now also collect this visitor tax on bookings. However, this does not apply to vehicle rentals either.
Practical aspects of paying taxes
Payment procedure for rentals
Taxes are usually collected automatically during the rental process. Car rental companies are registered GST collectors and are required to include this tax in the price of their services. You do not have to calculate or pay GST separately—it will be automatically added to your rental bill.
When you receive a receipt or invoice from the rental company, you will see a detailed breakdown of the cost, including the base rental cost, any additional fees, and 5% GST. It is important to keep these documents for your tax records, especially if the rental was for business purposes or if you plan to claim a deduction for moving expenses.
Documentation and records
Keep detailed records of all expenses related to the rental of the truck. If you choose the detailed method for calculating vehicle expenses, you must keep all receipts and records of vehicle expenses. This includes not only the rental cost and GST paid, but also fuel, insurance, and any additional services.
For business purposes, it is especially important to have proper documentation, as this will allow you to claim ITCs and other tax deductions. The Canada Revenue Agency may request these documents during an audit, so it is important to keep them organized and accessible.
2025 Tax Law Changes
New vehicle deduction limits
The Department of Finance Canada has announced new income tax deduction limits and expense benefit rates for vehicles that will apply in 2025. The capital cost allowance (CCA) ceiling for Class 10.1 passenger vehicles will be increased from $37,000 to $38,000 before taxes for vehicles (new and used) purchased on or after January 1, 2025.
Deductible leasing expenses will be increased from $1,050 to $1,100 per month before taxes for new lease agreements entered into on or after January 1, 2025. Although these changes are more relevant to long-term leasing, they may affect the pricing structure of rental companies.
Impact on short-term leases
The maximum interest deduction will remain unchanged at $350 per month for new auto loans entered into on or after January 1, 2025. The CCA ceiling for Class 54 zero-emission passenger vehicles ($61,000 before taxes for new and used vehicles) will also remain unchanged in 2025.
Comparison with other provinces
Alberta's advantages
Alberta offers significant tax advantages over other provinces due to the absence of PST. While you pay only 5% GST in Alberta, the tax burden can be significantly higher in other provinces. For example, British Columbia has a 5% GST plus 7% PST, for a total of 12%. Ontario has a 13% HST, which combines federal and provincial taxes.
Interprovincial moves
Tax obligations can become complicated when moving between provinces. If you rent a moving truck in Alberta but return it in another province, additional fees and different tax rates may apply depending on the province of return. Some companies charge one-way fees, which are also taxable.
Recommendations for consumers
Budget planning
When planning to rent a truck in Calgary, always add 5% to the base cost to cover GST. This will help avoid surprises when the final bill arrives. Also, keep in mind possible additional fees such as insurance, fuel, mileage, and drop-off fees.
Maximizing tax benefits
If the rental is for business purposes or a work-related move, make sure you understand all available tax deductions and credits. Keep detailed records of all expenses and consult a tax advisor if you have questions about your deduction eligibility.
For personal moves, investigate whether you can claim a moving expense deduction. While this won't reduce the GST paid on the lease, it may reduce your overall tax liability at the end of the year.
So, the answer to the question of whether you need to pay taxes on a truck rental in Calgary is a definite yes. All renters must pay 5% GST regardless of the purpose for which the rented vehicle is used. However, thanks to the absence of provincial sales tax in Alberta, the overall tax burden remains relatively low compared to other Canadian provinces. Proper planning and record keeping can help maximize available tax benefits and reduce overall rental costs.