Now that your business is up and running, you might need to add an extra skill to your growing list: tax collector. That’s because once your sales ramp up, you may need to register for, collect, and remit the federal goods and services tax (GST) or, in some provinces, the harmonized sales tax (HST). Don’t worry, we’ve outlined it all for you below!
Understanding the GST and HST registration requirements can be confusing. The requirements can differ based on where you’re located, how much — and what — you’re selling, and where your customers are located. Here’s a quick guide to help you figure out the requirements.
GST vs. HST
The GST is the federal tax most businesses selling goods and services in Canada need to collect from their customers. The GST rate has been 5% since January 1, 2008.
Some provinces today combine provincial sales taxes with the GST to create the harmonized sales tax, or HST. This means depending on your location, you may need to charge HST instead of GST.
Do you need to register?
Your business must register for a GST/HST account and charge GST/HST if you answer “yes” to two questions:
1. Does my business sell taxable supplies in Canada?
2. Is my business generating over $30,000 and therefore not a small supplier?
What are taxable supplies?
Most goods and services in Canada are taxable supplies — everything from car repairs, hotel accommodations, clothing and shoes, and legal and accounting services — and most have the full GST rate of 5% applied.
Some goods and services are categorized as “zero-rated” supplies; this means they’re taxable at the rate of 0%. Zero-rated supplies include basic groceries, prescription drugs, and some goods and services sold to customers outside Canada. Still other supplies are non-taxable, like daycare services and residential rent.
If your business sells taxable supplies in Canada (at the rate of either 5% or 0%), you must register for the GST/HST . . . unless you’re a small supplier.
What’s a small supplier?
Being categorized as a small supplier depends on how much money your business makes. If your revenue from worldwide taxable supplies was equal to or less than $30,000 in both a calendar quarter and over the last year (the last four consecutive calendar quarters), your business is a small supplier.
If you’re a small supplier, for the most part you don’t have to register for the GST or HST.
Here’s how to calculate small supplier status:
- For the end of each calendar quarter (March 31, June 30, September 30, and December 31, assuming a December 31 fiscal year end), total up your taxable sales for the four most-recent calendar quarters (the last 12 months).
- If the total is more than $30,000, your business is not a small supplier and must register to start collecting GST or HST.
- You’re also required to register if your taxable sales are more than $30,000 in any single calendar quarter.
Charging GST, HST, or GST and Provincial sales tax
If you have to register, how do you know what taxes to collect? Depending on where you live, you may need to charge GST, HST, or GST and provincial sales tax (PST).
Ontario, Nova Scotia, New Brunswick, PEI, Newfoundland, and Labrador have combined their provincial sales taxes with the federal GST to create their harmonized sales tax (HST).
In British Columbia, Saskatchewan, Quebec, and Manitoba, PST is separate from the GST. So if you operate in one of those provinces, your business may need to charge, collect and remit both PST and the GST, using two different sets of forms. (You can find more information on the rates in your province here.)
Alberta and the three territories (Yukon, Northwest Territories, and Nunavut) don’t have a PST — meaning your business only has to charge the GST.
Getting registered as a tax collector
If you think this all sounds complex, you’re right. And in addition to the general rules outlined here, there are other details that might be important in your case, such as determining if the types of good or services you sell is taxable.
You can call the Canada Revenue Agency for more information or to register by phone (at 1-800-959-5525). You can also register online, by mail, or even in person at a tax services office. (If you’re in Quebec, contact Revenu Quebec at 1-800-567-4692 instead). Once your registration is complete, you’ll be ready to collect and remit the GST or HST.