Checkout Challenges: Lessons Learned from Canada’s 2024 GST/HST Holiday

It was just a year ago when the 2024 holiday season sales tax exemption promised savings at the checkout for consumers and a boost in sales for small businesses, yet delivered confusion, additional costs, and headaches behind the counter. 

The last-minute tabling of Bill C-78 in late November 2024, allowed the federal government to temporarily remove the goods and services tax (GST) and the harmonized sales tax (HST) on select items, including prepared food, beverages, children’s clothing, and books.^[i] The bill itself was intended to provide Canadians with a tax break during a busy holiday season, from December 14, 2024, to February 15, 2025. However, it left small businesses with just over three weeks to decode new regulations and prepare for the holiday rush. Many business owners entered into this uncharted tax exemption period with confusion, anxiety, and uncertainty about how to implement the new exemption properly.  

Although the federal government had good intentions to help “put more money in your pocket” during a time of economic uncertainty, what looked promising on paper was much more complex in reality and ended up offering limited to no economic benefits to most small businesses. 

Heading into the tax holiday

Small businesses were already bracing for challenges heading into the GST/HST holiday. CFIB data showed that 63% felt they did not have enough time to implement the exemption properly, and nearly three quarters (74%) expected it to be complicated and costly to execute (Figure 1). 

Figure 1: Business owner concerns heading into the GST/HST tax holiday

Question: Do you agree or disagree with the following statements about the temporary GST/HST holiday? (Select one for each line)
Source: CFIB, Special Survey- Impact of Canada Post strike and GST/HST exemption, November 26, 2024 - January 8, 2025, final results, n= 5,469 to n= 5,482.

For some businesses, the GST/HST holiday meant reviewing their entire inventory—item by item—to determine which products were exempt from the GST/HST, updating their point-of-sale system accordingly, or hiring someone to do it just before December 14 and again when the GST/HST holiday would be lifted.  

Businesses were feeling uneasy. They had to manage the implementation of the GST/HST holiday, as well as customer expectations. About 42% of small businesses were concerned about customers’ reaction to the scope of the GST/HST holiday, specifically regarding the clarity of exempt versus non-exempt items (Figure 1). Further, as depicted in figure 1, nearly half of SMEs (48%) expressed concern that the Canada Revenue Agency would go after them for GST/HST errors made in good faith during the GST/HST holiday. 

A costly and complex endeavor to implement, and shifting consumer behaviour

Figure 2: Biggest challenges SMEs expected in implementing the GST/HST tax holiday

Question: Do you expect your business will face any of the following in implementing the temporary GST/HST holiday? (Select all that apply)
Source: CFIB, Special Survey - Impact of Canada Post strike and GST/HST exemption, November 26, 2024 - January 8, 2025, final results, n= 1,141.

Beyond the financial strain, many small businesses also experienced issues with the mechanics of implementing the exemption and the lack of clear guidance. As presented in figure 2, 66% of small businesses had trouble understanding what products were exempted entering the GST/HST holiday, while 70% had difficulty planning how to process the exemption at the point-of-sale. Many small business owners expressed frustration, describing the rollout as “poor timing, poorly communicated and not enough lead up for businesses.” 

The GST/HST holiday also disrupted consumer behaviour, creating unexpected pressures on small retailers. About 41% of SME’s reported customers returning items just to repurchase them once the tax exemption was implemented (Figure 2). While other businesses experienced delayed purchases leading up to the exemption date. As a children’s toy store owner shared:  

“I already noticed an immediate drop in sales… a lot of people waiting until December 14th [the start of the tax holiday] to make their purchases. Which is having a large negative impact on my business.” 

In the end, meagre return on time and effort for SMEs

Coming to the end of the GST/HST holiday, SMEs identified that the largest challenges they faced during the tax exemption period were administrative overload and point-of-sales operations (Figure 3).

Figure 3: Biggest challenges SMEs expected in implementing the GST/HST tax holiday

Question: What are the biggest challenges your business is facing as a result of the GST/HST tax break? (Select all that apply)
Source: CFIB, Your Voice Survey - January 2025, January 9 - 31, 2025, final results, n= 490.
Note: The shares shown in the figure have been rebased to reflect only business owners who reported facing challenges. Overall, 36% of members selected “no challenges,” while 8% responded “don’t know/unsure.” 

Despite lots of media and public attention around the GST/HST holiday, many small businesses reported that the actual economic impact was limited. Most businesses felt the tax exemption shifted sales rather than creating new demand, moving purchases from one period to another without increasing overall revenue. The GST/HST holiday ultimately fell short of expectations, with limited economic impact for most small businesses. Only 5% reported stronger sales compared to the same period last year, while 66% said their sales were roughly unchanged from 2023. 

For businesses whose products qualified for the GST/HST holiday, hospitality and arts, recreation, and information firms were somewhat more positive about its impact (Figure 4). Yet, overall, 82% of SMEs required to apply the exemption still viewed it as unsuccessful. As one business owner put it: 

“It doesn’t seem to be positively impacting our business; it’s just become more of an administrative nightmare.” 

Figure 4: Perspectives on the success of the GST/HST holiday by sector

Question: How would you rate the overall success of the GST/HST tax break so far for your business? (Select one)
Source:  CFIB, Your Voice Survey - January 2025, January 9 - 31, 2025, final results, n= 2 014.
*Small sample size. Note that not all sectors would have directly benefited or had to apply the tax holiday. 

Conclusion

In the end, while the government framed the tax exemption as putting more money in Canadians’ pockets, many small business owners viewed it as a politically timed move which resulted in extra costs, confusing rules, and operational headaches without delivering the promised economic boost. One business owner even called it “a last attempt by a government to gain votes,” while another dismissed it as “just a gimmick.” Government must take stock and avoid such unproductive decisions in the future.  

Ultimately, the GST/HST holiday underscores a clear lesson: government policy and programs meant to support small businesses must be realistic, clearly communicated, and designed with the practical realities of small day-to-day business operations in mind. 

Lessons learned from a 2-month GST/HST break

1.  Avoid creating complex and burdensome measures in the future. Keep things simple.  
2. Provide sufficient notice and clear guidance. Businesses need time and information to prepare properly. 
3. Recognize the cost to small businesses. For example, provide affected businesses with a credit in their GST/HST accounts to offset implementation costs.
4. Waive taxes owed, penalties, and interest for errors made in good faith. Emphasize education over enforcement. 
5. Avoid temporary and short-lived measures, consider permanent measures instead. 

^[i] Department of Finance Canada, Government Tables Legislation to Put More Money in Your Pocket, November 27, 2024, https://www.canada.ca/en/department-finance/news/2024/11/government-tables-legislation-to-put-more-money-in-your-pocket.html. List of items included and excluded: https://www.canada.ca/en/services/taxes/child-and-family-benefits/gst-hst-holiday-tax-break.html