Do I need to charge GST/HST?
February 4, 2021
Just started your own business? Congratulations! According to Statistics Canada, you can now count yourself among the other 2.9 million Canadians who are living the self-employed dream.
If you’re still in the process of setting up your new business, one of the biggest questions you might have is whether or not you should register your business to collect the federal goods and services tax (GST) and in some provinces, the harmonized federal-provincial tax (HST). Here are some answers to the most common questions around GST/HST.
Do I have to register for GST/HST?
If your business is a part-time gig, or you don’t earn more than $30,000 per year in revenue yet, you’d be considered a “small supplier” and won’t need to charge your clients for GST/HST. If business picks up, or you decide to take the plunge and go at it full-time, you’ll need to start charging these taxes.
As of 2020, if you supply digital products or services to Canadian customers (like Netflix does), you’ll need to start charging GST/HST.
When should I start charging GST/HST?
If your business generates more than $30,000 in income, you’ll need to start collecting GST/HST from your clients. Here are four scenarios:
Scenario 1: You get a GST/HST number right away.
If you have a sense of how much revenue you’ll make, you might decide to become a GST/HST registrant as soon as you start your business. This applies to you if you’re expecting to exceed the $30,000 threshold at some point in the near future. You’ll want to receive any GST/HST paid back from the government on your business expenses, especially start-up costs.
Scenario 2: You make $30,000 in a period of 90 days.
Sometimes, you think you’ll be a small supplier, but then your business takes off and you make more than $30,000 in a specific three-month period (also known as a quarter). In this case, the day the sale goes through that took you over the $30,000 threshold is the day you’re no longer considered a small supplier. You have to charge GST/HST on the sale that put you over the $30,000 limit, and on any sales after that, even if you haven’t registered yet. You’ll have 29 days to register for a GST/HST number with the government from the day of that sale.
Scenario 3: Slowly but surely, you make over $30,000.
Sometimes, you decide to remain a small supplier, but your business is steadily growing and bringing in revenues in excess of $30,000 over the course of four (or fewer) previous, consecutive quarters. You’ll be considered a small supplier for those four calendar quarters, plus the next month. But – your first sale after that additional month, and all sales after that, will have to include GST/HST. Again, you’ll have 29 days from the first day of the second month to register.
Scenario 4: You make $30,000 in 2 quarters.
In this scenario, you decide to remain a small supplier, but your business brings in revenues over $30,000 by the end of two consecutive calendar quarters. You’ll be considered a small supplier for one month after you exceed the $30,000 limit, and then you’ll have to start charging GST/HST on all sales after that additional month. You’ll have 29 days from the first day of the second month to register.
Are you ready to register? You can learn more and register online here. Businesses that charge GST/HST also get to claim it on their expenses, so remember to keep all of your receipts.