Demystifying GST/HST for Your New Canadian Business: A Guide

Congratulations on joining the ranks of Canada’s thriving self-employed community – Statistics Canada reports over 2.9 million Canadians are living the entrepreneurial dream [source: Statistics Canada]!

One of the early hurdles for new business owners is understanding the Goods and Services Tax (GST) and the Harmonized Sales Tax (HST). This blog post simplifies everything you need to know about GST/HST for your Canadian business.

Do I Need to Charge GST/HST?

If you’re a budding entrepreneur with a part-time gig or haven’t broken the $30,000 annual revenue mark, you’re considered a “small supplier” exempt from charging GST/HST. However, as your business scales up, or you transition to full-time, you’ll need to factor in these taxes.

Important Note: Since 2020, businesses supplying digital products or services to Canadian customers (think Netflix) must charge GST/HST.

When to Start Charging GST/HST

Surpassing the $30,000 revenue threshold triggers the requirement to collect GST/HST from your clients. Here are four key scenarios to consider:

Scenario 1: Proactive Registration

If you anticipate exceeding the $30,000 threshold soon, register for a GST/HST number upfront. This allows you to claim input tax credits (ITCs) for GST/HST paid on business expenses, including start-up costs.

Scenario 2: Reaching $30,000 in 90 Days

Sometimes, businesses unexpectedly take off, exceeding $30,000 in revenue within a quarter (three months). The sale pushing you over the limit marks the day you’re no longer a small supplier. You’ll need to charge GST/HST on that sale and subsequent sales, even if unregistered. You have 29 days to register for a GST/HST number with the CRA.

Scenario 3: Gradual Growth Over $30,000

You might choose to remain a small supplier initially. However, if your business steadily grows, exceeding $30,000 over four consecutive quarters, you’ll be considered a small supplier for those quarters, plus an additional month. However, your first sale after that month and all following sales will require charging GST/HST. You’ll have 29 days to register from the first day of the second month.

Scenario 4: Reaching $30,000 in Two Quarters

Let’s say you decide to stay a small supplier, but your business surpasses $30,000 in revenue by the end of two consecutive quarters. You’ll be considered a small supplier for one additional month after exceeding the limit. Then, you’ll need to start charging GST/HST on all sales after that month. The 29-day registration window applies from the first day of the second month.

Ready to Register?

The Canada Revenue Agency (CRA) website offers a wealth of information and online registration. Remember, businesses charging GST/HST can also claim ITC on their business expenses, so keep those receipts handy!