If you're a business owner in Canada, taxes are probably on your mind at least once a day. Almost every day, you charge, collect, and/or pay sales tax whether it's in your business or in everyday life. That's why it's crucial to understand GST and HST, two forms of sales tax that may be required for your business.
If your business makes over $30,000 a year, or you expect to, we recommend you keep reading: this is important for you.
In this guide, we will walk you through how to register for GST/HST, eligibility criteria, and the steps involved, with all the links you'll need to bring you through the application process with the Canada Revenue Agency.
Key Highlights
You need to register for GST/HST when you surpass $30,000 in taxable income, whether you are a corporation or sole proprietor.
Obtaining a business number is the first step in registering for GST/HST.
Registering for GST/HST allows businesses to charge, collect, and remit sales taxes.
Compliance with GST/HST regulations is essential to avoid penalties and interest charges.
The Basics Of GST, HST, & PST In Canada
GST/HST, which stands for Goods and Services Tax/Harmonized Sales Tax, are different types of sales tax applied across Canadian provinces and territories.
GST is a 5% tax that applies to most taxable items and services across all provinces and territories in Canada.
HST is implemented in some provinces, combining GST with the Provincial Sales Taxes (PST) to form the Harmonized Sales Tax (HST). The HST rates in these provinces range from 13% to 15%.
PST is the Provincial Sales Tax (also called QST in Quebec), a tax rate charged by certain provinces on top of the federal GST rate.
Businesses that are registered for GST/HST are required to charge, collect, and remit the tax to the CRA on taxable supplies. The tax is ultimately borne by the end consumer, as businesses pass on the tax amount to their customers.
GST vs. HST: What's the Difference?
The key difference between GST and HST lies in the provinces where they are applicable.
The HST system is implemented in:
Ontario (13%)
New Brunswick (15%)
Newfoundland and Labrador (15%)
Nova Scotia (15%)
Prince Edward Island (15%)
Since GST is included in this rate, HST represents the total sales tax paid in these provinces.
So, what's the situation in the rest of Canada? In the following provinces and territories, a 5% GST is charged in addition to each province's PST (Provincial Sales Tax):
Alberta (No Provincial Sales Tax)
British Columbia (7% PST)
Manitoba (7% PST)
Northwest Territories (No Provincial Sales Tax)
Nunavut (No Provincial Sales Tax)
Quebec (9.975% QST)
Saskatchewan (6% PST)
Yukon (No Provincial Sales Tax)
Eligibility Criteria for GST/HST Registration
If you are a "small supplier", you do not need to register for GST/HST. A small supplier is a business whose worldwide taxable supplies are $30,000 or less in a single calendar quarter or in the last four consecutive calendar quarters. Basically, if you sell or intend to sell less than $30,000 in products or services in one year, you do not need to register.
If your business exceeds the threshold for being a small supplier, you must register for GST/HST. The effective date of registration will depend on various factors, including the consecutive calendar quarters in which you surpass the threshold and the annual revenue of your business.
Voluntary Registration: Advantages and Considerations
Even if you are not required to register for GST/HST as a small supplier, you do have the option to register voluntarily. There are 3 main potential benefits of doing so:
The ability to claim input tax credits (ITCs). ITCs allow businesses to recover the GST/HST paid on business expenses.
If you anticipate exceeding the small supplier threshold in the near future, you can proactively manage your tax obligations and ensure a smooth transition into GST/HST compliance.
If you produce or sell zero-rated supplies, voluntary registration allows you to claim ITCs for the GST/HST paid on inputs used to produce those supplies.
Preparing to Register for GST/HST
The structure of your business can have implications for GST/HST registration. Before starting the registration process, be sure to understand what your business structure is and how it may impact the process:
Sole Proprietorship: As a sole proprietor, you will need to register for a Business Number here before registering for GST/HST. You will need this number in order to complete the GST/HST application.
Partnership: In a partnership, each partner must register individually for GST/HST using their own business numbers. The partnership itself is not registered for GST/HST.
Corporation: The corporation's name and business number should be used during the registration process. Since you are incorporated, you likely already have this information and registration complete, and can go ahead to the GST/HST process.
Remember that in each case, you are only required to register if you surpass $30,000 in taxable income.
Step-by-Step Guide to Registering for GST/HST
Registering for GST/HST is a straightforward process, thanks to the Canada Revenue Agency's (CRA) online registration system. However, you'll need to understand each step and pay careful attention to ensure a successful registration.
Let's go over each step in more detail.
Step 1: Choose Between Online or Paper Application
The Canada Revenue Agency (CRA) provides businesses with the option to register for GST/HST online or by using a paper application. Both methods have their advantages, and businesses can choose the method that suits them best.
If registering online, you can open or manage your account here. If registering by mail, fax, or phone, you can contact the CRA here to find out your next steps. Before starting, you'll need:
Your effective date of registration: This is either the day you surpassed $30,000 (the day you stopped being a small supplier), or if you are registering voluntarily, it's the date of your request.
Your fiscal year: This is the tax year for your corporation, you can select the same for your GST/HST.
Total annual revenue
Basic business and personal information, including your Social Insurance Number
Step 2: Follow the Online Steps & Submit Your Application
Equipped with this information, you will be ready to follow the online steps to register for GST/HST. Once submitted, you will need to await your GST/HST account number to confirm that your registration is complete. You should receive these numbers electronically or by mail within a few days or weeks once your application has been accepted.
After Registration: Next Steps and Compliance
After successfully registering for GST/HST, there are certain next steps and compliance requirements that businesses need to follow. Let's continue with the next steps of this process.
Step 3: Start Charging and Collecting GST/HST
Now that you're registered, you will need to start charging tax to your customers. Most accounting software will include a simple tax option, and you can also use the Government of Canada's GST/HST calculator to make sure you're charging the right amount. Once the tax is collected, you should set it aside in a separate account for the next step.
Step 4: File Your GST/HST Return
Depending on your level of sales and the amount of tax collected , you will need to file a GST/HST return monthly, quarterly, or annually.
The rules regarding frequency are:
If your business's total annual taxable supplies exceed $1.5 million, you will be required to file your GST/HST returns on a monthly basis.
If your business's total annual taxable supplies are $1.5 million or less, you have the option to file your GST/HST returns on a quarterly basis.
Some businesses with very low annual taxable supplies may qualify for annual filing.
Due to these rules and thresholds, it's especially important to monitor your sales revenue throughout the year to ensure compliance with the filing frequency requirements set by the Canada Revenue Agency (CRA). If your business's annual taxable supplies exceed the threshold for your current filing frequency, you may be required to switch to a more frequent filing frequency.
Conversely, if your business's taxable supplies fall below the threshold for your current filing frequency, you may be eligible to switch to a less frequent filing frequency.
A professional can help you determine your filing requirements and help you file your GST/HST Return correctly. You can always book a call with ReInvestWealth’s professionals to learn more.
Step 5: Remit Your GST/HST
Depending on the information in your GST/HST return, you will need to remit a certain amount to the government, even if you have not been paid yet by your customers. Your payment deadline will vary depending on your filing deadline.
An accounting software like ReInvestWealth can take care of steps 3-4 for you, allowing you to collect and file your GST/HST easily. You can even set up auto-filing to make the whole process as simple as 3 clicks.
Frequently Asked Questions
Can I Cancel My GST/HST Registration If My Business Closes?
Yes, you can cancel your GST/HST registration if your business closes. You must notify the Canada Revenue Agency (CRA) of the closure and the effective date of the closure. The CRA will update its records accordingly.
How Often Do I Need to File GST/HST Returns?
The filing frequency for GST/HST returns depends on the total annual taxable supplies of your business. Businesses may be required to file monthly, quarterly, or annually.
What Are the Penalties for Non-Compliance with GST/HST Regulations?
Non-compliance with GST/HST regulations can result in penalties and fines imposed by the Canada Revenue Agency (CRA). Penalties may vary depending on the nature and severity of the non-compliance, but they can include fines, interest charges, and other consequences outlined by the CRA.
Do I Need To Register for GST/HST As A Sole Proprietorship?
As a sole proprietorship in Canada, you may need to register for GST/HST depending on your revenue. If your taxable supplies exceed $30,000 in a consecutive 12-month period, you must register. It is essential to monitor your revenue closely and register timely to comply with the regulations and avoid penalties.