Do you know if you need to register your business for GST/HST? Do you know the benefit to voluntary registration? Are you claiming ITCs? Does GST need to be charged on all goods and services? We've simplified some answers to the questions that many small business owners have.
We'll start by answering a common question "what is GST?". GST is a 5 percent tax on goods and services that is produced by businesses and passed along to the consumer. GST was adopted in 1991 replacing the manufacturers' sales tax and is applied to all territories and provinces across the country. Some provinces have incorporated GST with their provincial sales tax, this is known as harmonized sales tax, also referred to as HST. Newfoundland and Labrador, Nova Scotia, Ontario, New Brunswick and Prince Edward Island participate with the federal government using HST. The remaining provinces and territories charge the GST separate from the provincial sales tax that might be charged.
The simple explanation on whether or not you are required to register for GST is this: if your cumulative revenue exceeds $30,000 within the previous 12 months, you are required by law to register your business for GST.
Some small businesses prefer to voluntarily register for GST regardless of their annual sales being less than $30,000. You are able to recover your input sales tax credits (ITCs) on business purchases and start-up costs; this is money back in your pocket. It is important to note that if you have registered for GST and are under the $30,000 threshold, you are still required to charge, collect, and remit GST on products and services sold.
For more detailed information on whether or not you are required to register for GST see the CRA's guide.
Now that you know if you need to register, you're probably wondering how to do so. There are three ways to register: online, telephone or mail / fax. As usual, we prefer the online method so we'll start there!
You can register online through the CRA website, registration is secure, convenient and easy to use. You must have a valid social insurance number (SIN) and you must provide your own personal information (date of birth, full name and postal code). If you are registering a business you will need the business name and address, type of business (IE: sole proprietor / corporation) as well as a description of the business activity.
- To register your business for GST online, you can visit the CRA website.
- To register by phone you can call 1.800.959.5525.
- To register via mail or fax you will need to complete the RC1 form and fax or mail it to a tax centre.
Once you've registered for GST the CRA will assign you a Business Identification Number (BIN), you will use this number when remitting your GST and for all dealings with the CRA. As soon as you are registered you must:
- Charge, collect and remit the GST that applies to the goods and services you've sold
- File a GST/HST return based on your assigned reporting period, and remit payment if required to do so
- You must stay registered for at least one year before you can cancel your registration
When charging GST it is good practice to quote your GST/HST number on your invoice or receipt.
Watch for part two of our GST blog: the importance of proper documentation, which GST/HST rate to charge and how to file your GST/HST return!
**Note** Although this information is comprised of federal and provincial/territorial sources, the information provided is subject to change, and may not be comprehensive. We do not warrant the accuracy of this information, and advise you to consult with the Canada Revenue Agency, your provincial/territorial government, and/or a tax professional to confirm all dates and deadlines. With that said, we thank you for using LedgersOnline as an informative source and offer you a link to the various tax solutions offered by our bookkeeping and accounting team.