GST/HST trips up a lot of new business owners. When do you have to register? What rate do you charge? How often do you file? Here's a plain-English guide for small businesses in Ontario, where the HST rate is 13%.
What GST/HST is
The GST is a 5% federal tax on most goods and services in Canada. Several provinces, including Ontario, combine it with their provincial sales tax into the Harmonized Sales Tax (HST). In Ontario, the HST rate is 13%. As a registrant, you collect it from customers, claim back the HST you pay on business purchases, and send the CRA the difference.
When you have to register
Most businesses must register once they're no longer a small supplier. You stop being a small supplier when your worldwide taxable sales (including those of associated businesses) go over $30,000:
- in a single calendar quarter, or
- over the last four consecutive calendar quarters.
The timing of when you must start charging tax is different for the two tests, so check the CRA's page on when to register and start charging as soon as you're close to the limit.
Exceptions to know:
- Taxi and ride-share drivers must register for GST/HST no matter how little they earn.
- You can register voluntarily before you hit $30,000. That lets you claim input tax credits, but you must then charge HST on your taxable sales.
How to register
You can register online through Business Registration Online, by phone, or by mail. You'll get a business number (BN) with a GST/HST program account.
Charging the right rate
In Ontario, you generally charge 13%. If you sell to customers in other provinces, the place-of-supply rules may require a different rate, such as 5% GST or a different HST rate. The CRA's GST/HST calculator and rate tables help.
How often you file
Your filing frequency is based on your annual taxable sales:
- $1.5 million or less: annual filing by default (you can choose quarterly or monthly)
- More than $1.5 million up to $6 million: quarterly (you can choose monthly)
- More than $6 million: monthly
Monthly and quarterly returns are generally due one month after the end of the reporting period. Annual returns are generally due three months after your fiscal year-end. If you're an individual with business income and a December 31 year-end, your annual return is due June 15, but any amount owing is due April 30.
Almost all registrants must now file electronically. If you file annually and your net tax is $3,000 or more, you may also have to pay quarterly instalments.
Input tax credits (ITCs)
You can generally claim back the HST you paid on purchases used in your commercial activities. Keep invoices that show the required details, including the supplier's GST/HST number on purchases of $100 or more. Most small businesses have four years to claim an ITC.
The Quick Method
Smaller businesses with annual worldwide taxable sales (including associated businesses) of $400,000 or less may be able to use the Quick Method. You remit a set percentage of your sales instead of tracking actual ITCs on most expenses. It can save time and sometimes money, but it doesn't suit every business. Compare before you elect.
Common mistakes
- Registering late and owing HST you never collected
- Charging HST before you're registered
- Claiming ITCs without proper invoices
- Forgetting that HST collected isn't your money until you've remitted it
Sources
- When to register for and start charging the GST/HST, Canada Revenue Agency
- GST/HST for businesses, Canada Revenue Agency
- How to file a GST/HST return, Canada Revenue Agency
- GST/HST calculator and rates, Canada Revenue Agency
- Input tax credits, Canada Revenue Agency
Want HST off your plate? Our HST filing service handles registration, returns, and ITCs for Ontario businesses.