Do I need to charge GST/HST?
Posted October 4th 2013
So, you’ve just started your own business. Congratulations, and welcome to the world of the self-employed. According to Statistics Canada, 2.7 million Canadians were living the self-employed dream.
One of the biggest questions for the new entrepreneur is should I register my business to collect the federal goods and services tax (GST) or the harmonized federal-provincial tax (HST) in some provinces. Here are some answers to the most common:
Do I have to register for HST/GST?
Businesses that collect more than $30,000 in revenue a year are required to charge and remit HST/GST. If, for example, your business is part-time, perhaps it will stay under that threshold and you will be considered to be a “small supplier.” But if business picks up, or you decide to plunge into it full-time, you’ll have to start charging the tax. Hopefully, you won’t have to take it out of your profits because you didn’t start charging HST/GST at the right time.
When do I have to start charging HST/GST?
When you have to become an HST/GST registrant and begin collecting the tax depends on the circumstances of how you crossed the $30,000 threshold. There are four scenarios.
- The first instance is simple. You decide to become a GST/HST registrant when you start your business. You expect to exceed the $30,000 threshold at some time in the near future. You also want to receive any GST/HST paid back from the government on all expenditures especially those high startup costs.
- In the second instance, you elect to remain a small supplier, but business goes through the roof, generating more than $30,000 in one particular three-month period. In this case, the day the sale goes through that took you over that $30,000 threshold becomes the day you cease to be a small supplier. You must charge GST/HST on the sale that put you over the $30,000 limit, and on all sales after that, even if you are not yet registered. You now have 29 days to register with the government.
- In the third scenario, you elect to remain a small supplier, with your business growing more slowly, bringing in revenues in excess of $30,000 during four (or fewer) previous, consecutive three-month periods. You will be considered to be a small supplier for those four calendar three-month periods, plus the next month. Your first sale after that additional month, and all sales thereafter, will have to include GST/HST. You will have 29 days from the first day of the second month to register.
- In the fourth scenario, you elect to remain a small supplier, but your business generates revenues in excess of $30,000 by the end of two consecutive calendar three-month periods. You will be considered a small supplier for one month after exceeding the $30,000 limit. You will have to start charging GST/HST on all sales after that additional month. Again, you have 29 days from the first day of the second month to register.
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