Are you unsure when to register for a GST/HST account in Canada? Businesses earning over $30,000 yearly must register with the CRA. This guide will explain the process step-by-step and show why early registration benefits you.
Key Takeaways
- Businesses making over $30,000 in taxable sales within 4 quarters must register for GST/HST. Small suppliers below this limit are not required to register but can do so voluntarily.
- Registering early allows businesses to claim Input Tax Credits (ITCs). ITCs help recover sales tax paid on business expenses.
- Ontario applies a 13% HST rate. Taxable items include goods and services sold in the province.
- Filing returns electronically is mandatory after December 31, 2023, for most businesses, or penalties may apply.
- Ride-share and taxi drivers must register as soon as they start offering rides for payment under Canadian tax rules.
Understanding GST/HST in Canada
GST/HST is a tax on most goods and services in Canada. It affects businesses by requiring them to collect, report, and remit taxes correctly.
What is GST/HST?
GST means Goods and Services Tax. HST mixes GST with provincial sales tax. GST is 5%, but HST can reach up to 15% depending on the province.
These taxes apply to most goods and services across Canada. They support federal and provincial programs. Businesses must know these taxes to follow Canadian tax laws.
Importance for businesses in Ontario and Canada
Businesses in Ontario and Canada must register for a GST/HST account if they make over $30,000 in gross revenue. This rule helps collect taxes on taxable goods and services. Charging the right tax rate based on location is important to follow the law.
Registering lets businesses claim Input Tax Credits (ITCs). ITCs allow them to recover taxes paid on business expenses. Filing through tools like GST/HST NETFILE makes tracking simpler too. Proper registration keeps things running smoothly while following legal rules.
Who Needs to Register for a GST/HST Account?
Some businesses in Canada must register for GST/HST. Others can choose to register voluntarily based on their needs.
Mandatory registration criteria
Businesses in Canada must follow rules to register for GST/HST. These rules depend on income, activities, and type of business.
- Businesses making over $30,000 in taxable sales in one quarter or four straight quarters must register.
- Small suppliers do not need to register if their worldwide taxable supplies stay at $30,000 or less within four consecutive quarters.
- Companies passing the $30,000 limit must register right away.
- Taxi drivers and ride-share drivers must register as soon as they start offering rides for pay.
Voluntary registration benefits
Smaller businesses earning less than $30,000 a year can register to collect sales tax voluntarily. This adds professionalism and makes the business seem legitimate. It also lets them recover sales tax paid on expenses using input tax credits.
Early registration is helpful for those selling taxable goods or services in the U.S. Charging sales tax early gets you ready to grow beyond the revenue limit. It also builds trust with clients who expect proper tax handling from businesses.
Steps to Register for GST/HST
Registering for GST/HST is straightforward but requires attention. Follow the correct steps to meet tax rules and avoid penalties.
Applying for a GST/HST number
Get a Business Number (BN) before starting by applying online to Business Registration Online (BRO).
Provide business details like name, address, expected income, and activities. You will get your GST/HST number once approved.
Collecting GST/HST
Apply the appropriate sales tax according to the province. For instance, in Ontario, apply 13%. Display it clearly on each bill. A $100 service in Ontario becomes $113 with tax included ($13 tax).
Keep a record of all taxes collected and made for accurate filing. Businesses can claim credits for sales tax paid on eligible purchases to reduce overall expenses.
Filing a GST/HST return
GST/HST returns must be filed using approved methods. Electronic options include GST/HST NETFILE, My Business Account, Represent a Client, EDI filing, and GST/HST TELEFILE. Paper forms (GST34-2) can still be mailed but have limits on certain claims.
After December 31, 2023, penalties will apply if electronic filing is required but not used.
Common mistakes to avoid include entering wrong numbers on key lines or claiming expenses for personal use or ineligible purchases. Always check details carefully before submitting.
Paying collected taxes
Businesses must send collected sales tax to the CRA on time. This is called tax payment. Use electronic filing methods for accuracy, as the CRA requires this for many businesses. Late payments may lead to penalties.
Charge and collect taxes properly from customers. Then, file returns showing these amounts. Some refunds apply if taxes are charged incorrectly or certain conditions exist, like homebuyer refunds. Follow all tax filing rules to stay compliant with laws and avoid fines.
Special Considerations for Ontario Businesses
Ontario businesses face unique GST/HST requirements—explore these key details now.
Specific requirements for Ontario
Businesses in Ontario must register for a GST/HST account if they make over $30,000 in gross revenue. Non-resident businesses operating online also have specific tax rules under Ontario’s laws.
A relief period runs from December 14, 2024, to February 15, 2025. During this time, some items will get temporary GST/HST breaks. It is important to calculate and send collected taxes correctly to follow provincial rules.
Impact of HST in Ontario
Ontario applies a 13% Harmonized Sales Tax (HST) to taxable items. Businesses must charge this tax to customers and pay it to the government. This includes goods, services, and other taxable sales in Ontario.
Input tax credits allow businesses to recover HST paid on expenses. For example, spending $1,000 on costs lets a business claim $130 as an ITC. If the total HST collected is less than the ITCs claimed, businesses might get a refund—$117 in this case when revenue reaches $100.
Conclusion
Registering for a GST/HST account is key for businesses in Canada. It helps you meet tax rules and manage sales taxes. Acting early can save money and offer benefits. For more info, contact Hadri Law to guide you through the process with ease. Make smart choices for your business today! (437) 974-2374 – Email: contact@hadrilaw.com or book a free consultation