This article is for informational purposes only and does not constitute legal, accounting, or tax advice.The information contained herein is subject to change and may vary from time to time in your region. For specific advice applicable to your business regarding GST/HST number and GST/HST registration, please contact a professional.
Tax laws can seem a little intimidating, whether you’ve been in business for years or you’re just starting out. Learning the ins and outs of various tax laws, including the goods and services tax (GST), is key to successful business operations.
Say you’ve been in business for a few years. You’ve garnered new clients and, as your profits continue to grow, it’s essential to consider GST/HST requirements. A fellow business owner mentions to you that you might need to look into GST/HST registration. But, what’s that? And when should you register?
To help you stay on top of tax obligations without getting overwhelmed, this guide will help you understand and navigate the GST/HST registration process.
What Is the Goods and Services Tax (GST) in Canada?
In Canada, there are two levels of taxes: federal and provincial. The GST is a federal sales tax paid on most goods and services sold in the country. The current GST rate is 5%.
In certain provinces, it has been combined with a provincial sales tax and is called the harmonized sales tax (HST). In other provinces, you have to collect separate provincial sales taxes on top of the GST.
In New Brunswick, Newfoundland and Labrador, Ontario, Nova Scotia and Prince Edward Island, the HST is used. In British Columbia, Manitoba, Saskatchewan and Quebec, there is a separate provincial sales tax.
The place of supply determines the GST/HST rate. Suppose that your customer is located in New Brunswick but your business is based in Ontario. The place of supply is your customer’s location, so you would charge the HST rate for New Brunswick on the sale (15%).
The government of Canada has established the current sales tax rates:
- 5% (GST) in Alberta, British Columbia, Manitoba, Northwest Territories, Nunavut, Quebec, Saskatchewan, and Yukon
- 13% (HST) in Ontario
- 15% (HST) in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island
What’s a GST/HST Number?
A GST/HST account number serves as a unique identifier for your business in tax matters.The Canada Revenue Agency (CRA) assigns this number to your business to track collection, reports and remittances of the GST/HST. The same number is also used for other tax dealings with the CRA.
For instance, if you’ve structured your company as a corporation, you use your GST/HST number to report your corporate income tax. Additionally, if you have any employees in your business, you use it when reporting and remitting payroll deductions. After you obtain your GST/HST number, you must also place this number on every invoice going forward. But does your business require a GST/HST number? And how do you know?
Do You Really Need a GST/HST Number?
Most businesses in Canada have to register for a GST number. In fact, registering for a GST number is mandatory for all Canadian businesses unless the Canada Revenue Agency deems the business a small supplier.
According to the CRA, a small supplier can be a sole proprietorship, a partnership, or a corporation – if the company’s taxable revenues are less than $30,000 (before expenses) each quarter. It’s important to note that sales taxes assigned by provinces and income from capital property sales aren’t included in this calculation.
But even if all other aspects of this Small Supplier rule apply to you, you should know that you may still have to register, depending on the type of business you own. For example, if you operate a taxi or limousine service, you must register for a GST/HST number. Additionally, if you’re a speaker, singer, or some other type of performer who does not reside in Canada but sells tickets for admission into performances or seminars taking place in Canada, you must register for a GST/HST number.
As of July 2021, any businesses operating a marketplace or other platform that offer digital products to Canadian citizens, such as online music streaming – regardless of where the business is physically located – need to register for GST/HST as well. These digital marketplaces must charge GST/HST and remit both GST and HST, whichever applies to the province in which the digital products or services are sold.
If You’re a Small Supplier, Should You Register for GST/HST Anyway?
If you qualify as a small supplier according to the CRA, you’re not required to register for a GST/HST number — but it can still be beneficial. For instance, if you’re registered, you can reclaim all the GST or HST that you pay after purchasing anything for your business at the end of the year through Input Tax Credits. If you’re just starting your business, it may therefore be an intelligent decision to go ahead and complete a GST/HST registration.
Wait, GST, PST, and HST — What’s the Difference?
GST, PST, and HST are abbreviations for:
Goods and Services Tax
The GST is a federal-level sales tax imposed on nearly all sales and purchases. Understanding this tax is crucial for GST/HST registrants.
Provincial Sales Tax
The PST is a provincial-level sales tax imposed on nearly all sales and purchases.
Harmonized Sales Tax
The HST is a tax imposed on nearly all sales and purchases that are a combination, or harmonization, of that province’s sales tax and the GST. It’s essential for GST/HST registrants to be aware of this harmonization to avoid making mistakes on invoices and returns.
If your business is in, or does business in, Quebec, Revenu Québec handles these calculations and payments. If you do business in Quebec and in other parts of Canada, you’ll be responsible for Revenu Québec payments and payments to the CRA. It’s a good idea to have a financial advisor or accountant on your side to help you navigate these waters.
When Should You Complete Your GST/HST Registration?
GST/HST numbers are vital for proper accounting and financial management, but it doesn’t mean that you need to apply for a GST/HST number right away. While it certainly doesn’t hurt, the truth is that it actually depends on the type of business you operate and your expected annual revenue. If you think your revenue, prior to expenses, will exceed $30,000 per quarter, you should register for a GST/HST number.
That said, what if you just happen to have an excellent quarter or two? Do you need to register? Not necessarily. According to the Canada Revenue Agency, companies mandated to register for a GST/HST number must have had more than $30,000 in revenue in each of four consecutive quarters.
However, it’s worth mentioning that you must total your past four quarters. If the total is $120,000 or more, you must register for a GST/HST number. But remember: Even if your quarterly and yearly totals are less than the threshold, you should register as soon as possible if you want to be able to claim the input credits mentioned above.
If you make more than $30,000 in a single calendar quarter, you’re no longer considered a small supplier and must register for GST/HST collection. You must also charge GST/HST on the supplies or inventory that caused you to earn over the $30,000 cap. For detailed information, please see the CRA website.
You Lost Your Small Supplier Status — What Does It Mean?
If your business has revenues greater than $30,000 in any calendar quarter, the CRA no longer recognizes your business as a small supplier. This means that you must register for a GS/ HST number and begin charging GST/HST on your goods or services and remitting them to the CRA. Once you cross this threshold, you have 29 days from that date to apply for your GST/HST number. You can find more information on how and when to register and begin collecting GST/HST for your business on the CRA website.
You might think you need to apply for a GST number right away. And while that certainly doesn’t hurt, the truth is that it actually depends on what type of business you operate and your expected annual revenue. If you think your revenue prior to expenses will be more than $30,000 per quarter you should register, but companies with takings that are less than this do not have to register, as stated above.
That said, what if you just happen to have an excellent quarter or two? Do you need to register? Not necessarily. According to the Canada Revenue Agency, companies mandated to register for a GST number must have had more than $30,000 in revenue in each of four consecutive quarters. However, it’s worth mentioning that you must total your past four quarters. If the total is $120,000 or more, you must register for a GST number. But remember: Even if your quarterly and yearly totals are less than the threshold and you want to be able to claim those input credits mentioned above, you should register as soon as possible.
If you make in excess of $30,000 in one calendar quarter, you’re no longer considered a small supplier and must register for GST/HST collection. You must claim GST/HST on the supplies or inventory that caused you to earn over the $30,000 cap. For detailed information, please see the CRA website.
You Lost Your Small Supplier Status — What Does It Mean?
If your business has revenues greater than $30,000 in any calendar quarter, the Canada Revenue Agency no longer recognizes your business as a small supplier. This means that you must register for a GST number and begin collecting these taxes on your goods or services and remitting them to the CRA. Once you cross this threshold, you have 30 days from that date to apply for your GST number. You can find more information on how and when you must register and begin collecting GST/HST on the CRA website.
How Do You Register for a GST/HST Number?
You can apply for a GST/HST account to simplify tax handling. To get your business’s GST/HST number, simply contact the CRA to begin the application process. This number is key to managing your tax responsibilities. The process is incredibly convenient, as there are three different ways to apply:
- Online
- By mail
- By phone
You can apply for your GST/HST number online by heading to Business Registration Online, or BRO. Applying online is not only easy, but also advantageous because registration isn’t limited to GST/HST numbers. You can register for corporate, payroll and other taxes through this portal. Depending on the province of your business, the website will automatically transfer you to the correct business registry to collect sales tax based on that province’s requirements. Setting up your GST/HST account properly is essential for compliance, so take your time or enlist the help of an accountant.
You can also go to the CRA website and download a request for a Business Number, fill out the form, and mail it in – or you can call the CRA directly at 1-800-959-5525 and complete your registration over the phone with a representative. If your company is in Quebec, you must complete the registration process online or by mail with Revenu Québec.
Afterwards, the CRA or Revenu Québec will send you a notice of your registration acceptance along with your company’s registered GST/HST number. Your GST/HST number is crucial for your business operations, so make sure to keep it somewhere safe.
You Received Your GST/HST Number — Now What?
After you receive your GST/HST number, it’s time to begin collecting tax and remitting it to the CRA. It’s a good idea to create a separate account for maintaining your GST/HST monies.
Now that you’re collecting this tax, when should you file and when should you remit? Depending on your annual revenue, you have the option to file monthly, quarterly or annually. The CRA guidelines for GST/HST tax filings are as follows:
If your annual company revenues are $6 million or more, you must file every month. If your revenues are between $1.5 million and $6 million, you can still file every month if you desire, but you’re required to file quarterly. Companies that make less than $1.5 million annually can file monthly or quarterly if so desired but must file at least yearly. You can find more detailed information specific to your type of business, including GST/HST account management, on the CRA’s website.
Depending on your industry, there may be filing periods in which you’ve collected no GST/HST. In that case, you still must file, indicating your company hasn’t collected any GST/HST. Just like GST/HST registration, filing can take place online or by mail, but you can also file in person through participating financial institutions.
Armed with this knowledge you can have faith moving forward, whether you have to — or choose to — register for a GST/HST number.