Canadians got a temporary tax break for two months this winter on a list of GST/HST items, including grocery items such as prepared meals, snacks and soft drinks. 

Now that the ‘tax holiday’ is over, do shoppers really understand which grocery store foods are subject to taxes and which are not?

There may be logic behind the rules, but most consumers struggle to keep track of it. The rules vary based on not just the type of food, but also the quantity, packaging, and how the food is delivered. 

The onus is on consumers to understand the tax treatment of these items, because typically signage does not signify whether items are taxable or not. Quebec updated its laws last year to require stores to indicate through signage which food products are taxable. The new laws take effect in mid-May 2025. 

“It’s a dog’s breakfast of what is taxed and what is not taxed,” said Marvin Ryder, an associate professor with the DeGroote School of Business at McMaster University in Hamilton. “I think the average consumer has just given up and they view it as a lottery. I’m going to buy something, spin the wheel … and sometimes I win or sometimes I lose.” 

Consider two boxes containing four butter croissants each. They are the same price and brand. The plain butter croissant is considered tax free (‘zero rated’ in the language of the government regulations), but the croissant with chocolate filling is taxed. But if two more chocolate croissants are added to the box, there’s no tax.

The beverage rules are perhaps even more complex. Vegetable juices are not taxed in larger servings, but are taxed in smaller servings. Sold in 250 ml cans with a pull tab, it’s taxable. Sold in 540 ml sealed cans, it’s exempt.

Fruit juice rules vary depending on serving size, and whether there is 25% natural fruit juice content. The qualifying fruit juices are taxable in single serving boxes, but if the boxes are packaged into sets of three, or in larger boxes, not taxable. Fruit-flavoured drink powders are taxable. Fruit-flavoured iced tea powders are exempt, as are fruit-syrups to be added to milk. 

Milk is generally exempt, but if it’s dispensed into a cup where it is sold, (like in a cafeteria) it’s taxable. If it’s purchased from a vending machine, or at a catered banquet, it’s taxable. Non-dairy milk-like beverages made from soy or almonds are also taxable. 

“I don’t think someone set out to make it complicated,” Ryder said. The original plans around the introduction of the GST and HST more than 30 years ago were that basic groceries – eggs, milk, cheese, bread, meat, fruit and vegetables – would be exempt. 

“Over the 30 years, nice companies have taken some of these products and they’ve played with them, and made changes to them. So we start out with a loaf of bread, but we have infused it with this or that or something else. So now it’s kind of this, but it’s kind of that, and this is where the problem comes.” 

The taxable treatment can create inequities that annoy consumers. Vegans, for example, note that carrots are GST free, but carrot juice is not. Or that oats are exempt if they are used to make bread, but not if they are used to make milk-like beverages. 

Volume-based rules may provide a tax advantage to those that make larger quantity purchases, at the expense of seniors and other lower-quantity buyers. 

Kris Sims, Alberta director of the Canadian Taxpayers Federation, said the CTF would like to see grocers give more information to shoppers about what items are taxable – as long as the costs related to labels or packaging are not additional and ultimately passed on to consumers. 

“We don’t want the cost to go up,” she said. “And we don’t want the government doing it because they will definitely screw it up,” Sims said.