Accurate, clear revenue records make meeting your GST/HST filing obligations easier. Whether you are a small business owner new to sales tax or experienced, you need to know the rules. Generally, you must register for GST/HST once your total taxable sales reach $30,000 in a single calendar quarter or over four consecutive ones. Those who are below that threshold can choose to register voluntarily.
If your business sells taxable goods or services in Canada, you must collect GST or HST. This includes anything that falls under the umbrella of ‘taxable goods and services’, such as toys, jewellery, or fuel, but also things like hotel stays or rental cars. You must keep track of the tax you collect and file a return each quarter. You can claim your input credit at the end of the filing season.
Most Canadian provinces combine the federal government’s five percent GST with their own provincial sales taxes to create a harmonized sales tax or HST. For example, Ontario and New Brunswick currently charge a 13 percent HST. Other provinces, such as Manitoba and Saskatchewan, keep their provincial sales taxes separate from the GST, charging an eight percent retail sales tax (PST).
All businesses that sell taxable goods or services in Canada must be registered for GST/HST with the CRA. This includes sole proprietorships, partnerships, trusts, and corporations that earn more than $30,000 in annual revenue from the sale of taxable goods or services. Sole proprietorships, partnerships, and trusts that are deemed’small suppliers’ may choose to voluntarily register even if they earn less than the $30,000 threshold, as registration allows them to reclaim the GST or HST they paid on their business expenses and receive ITCs as a result.
How is GST Calculated?
The goods and services tax, or GST, is a national sales tax in Canada. It is applied to most products and services sold in the country, except for some politically sensitive items such as groceries, residential rent, and medical services. Some provinces combine the GST with their provincial sales taxes to create a harmonized sales tax or HST.
Companies that sell taxable goods or services must collect and report GST to the Canada Revenue Agency. This includes all businesses based in the country, even those with no physical presence here. The CRA imposes various penalties for filing late or incorrect returns, and the CRA can also seize the assets of a company that does not comply with its reporting obligations.
Carefully recording your business spending, including specifying exact amounts for GST/HST, throughout the year can help you comply with all reporting requirements and protect yourself from audits. You can use our free online invoice template to calculate GST on your sales and expenses. To do so, just enter your total invoice amount and select the “Find Subtotal (before tax)” tab. If you sell to customers in a province that splits GST and PST, select the “No PST” option to deduct only the GST from your total.
If you operate a small business in the province of Quebec, you must register with Revenu Quebec to file and collect taxes. A company address in the province, hiring employees, and regional production or marketing activities are all reasons to apply for a registration number.