Most businesses that operate in Ontario and have annual sales (revenues) totalling more than $30,000 must register for and charge HST. Not all goods and services are subject to HST/GST due to two factors: The type of supply and the amount of sales you have.
Depending on the nature of your business you may still choose to register as you will be able to claim input tax credits (ITCs) to recover the GST/HST you pay or owe on your business purchases. You may also find that some clients may only do business with businesses registered for HST.
The Canada Revenue Agency categorizes goods & services into three groups:
- Taxable – GST/HST is charged, collected and remitted. As a registrant, you may also claim credits (called Input Tax Credits or ITC’s) for GST/HST paid to produce the goods and services.
- Zero-rated – GST/HST is not charged, collected or remitted, but as a registrant, you can claim ITC’s for GST/HST paid to produce the goods and/or services. If your business is selling cucumbers at the farmer’s market, for example, no GST/HST is charged/collected from your customers because fresh vegetables are zero-rated. Also, if you are selling your services to businesses outside of Canada that are not registered, those sales would be classified as zero-rated as well.
- Exempt – GST/HST is not charged, nor collected and as the registrant, you can not claim ITC’s for any GST/HST paid. Examples of exempt services include music lessons and childcare fees.
Examples of each group type is available on the CRA’s web page Charge the GST/HST – Type of Supply.
It’s about your sales
With a few exceptions (including taxi drivers and ride-share partners), the requirement to register for the GST/HST doesn’t come into effect until you’re no longer a “small supplier” – once you reach $30,000 in sales.
You’re no longer a small supplier when your revenue (before expenses) is more than:
- $30,000 in a single calendar quarter (3 consecutive months), or within the previous four consecutive calendar quarters (not a calendar year). The distinction between a calendar year and four quarters is an important one.
- For example, if your business brought in more than $30K between July 1 and June 30 the following year, you’ve passed the threshold as a small supplier even though your revenue was less than $30K each calendar year.
As soon as your business makes $30,001 in a single quarter or in the last four quarters combined, you are required to register for GST/HST right away and begin to charge, collect and remit the tax. That first sale you make should include GST/HST as per place of supply.
Registering voluntarily for GST/HST
Registering voluntarily gives you a lead on proper record-keeping and is prudent if you know your business is going to exceed the Small Supplier threshold fairly quickly or if you produce or sell zero-rated supplies. Any services and products you have to buy for starting your business helps you to claim ITC’s. Your first returns could provide a refund of HST paid. Sometimes companies you may work for also require you to have an HST number.
Register for HST
It’s simple and free to register for your HST number online with the Canada Revenue Agency. When you register for HST you are given a unique Business Number (BN). If you have not obtained a BN, you do not charge HST. Once you have registered you have to remit at the required intervals even if you have zero sales.
For further information, visit the CRA web site or call +1(800)959-5525
Tax information for eCommerce sellers
To know which GST/HST rate to charge, a supplier has to know what type of supply they are making and where the supply is being made. The place where a supply is made is referred to as the place of supply.