I have just spent 2 hours reading this forum and trying it out. Here is the step-by-step guide on HOW TO SET UP TAXES FOR CANADIAN PROVINCES (as of 2015)
1. System>Configuration>Taxes> Main tax zone – set to Canada
2. System>Taxes>Manage tax categories – leave Default tax category
3. System>Taxes>Manage Rates>NEW – this is where you set up tax rates for each province.
Tax namekey should be e.g. ON (GST), QC (GST), NB (HST) because that’s how it will show up on the checkout. Then add Rate – 13, 5, …
Now you have the rates prepared and you have to connect them with the proper Zones. Go to:
4. System>Taxes> make sure you see Tax rules title on the top, and +New
Product tax category – Default tax category
Rate – choose a province with the rate
Cumulative tax – No This would be used before when we had two types of taxes in one province
Zone – choose the appropriate province from the dropdown. Make sure it matches the Rate!!!