For any business operating in Canada, understanding the Goods and Services Tax (GST) and Harmonized Sales Tax (HST) is crucial. These are consumption taxes applied to most goods and services sold in Canada. While initially daunting, registering for a GST/HST number is a standard part of doing business and, importantly, allows you to reclaim taxes you’ve paid.
Let’s break down why and how Canadian businesses navigate GST/HST registration.
What is GST/HST?
- GST (Goods and Services Tax): A 5% federal sales tax that applies across Canada.
- HST (Harmonized Sales Tax): In participating provinces (Ontario, New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island), the GST has been harmonized with the provincial sales tax to create a single, combined HST. The HST rate varies by province (e.g., 13% in Ontario, 15% in Atlantic provinces).
As a business, you generally charge GST/HST on most of your sales of goods and services. You then collect this tax on behalf of the government (the Canada Revenue Agency – CRA) and remit it to them.
Who Needs to Register for a GST/HST Number? (The “Small Supplier” Rule)
Not every business needs to register immediately. The key determinant is usually your total annual taxable revenues.
- Mandatory Registration: You must register for a GST/HST account if your business is no longer considered a “small supplier.” A small supplier is generally defined as a person or business whose total taxable revenues (before expenses) from all worldwide sales of goods and services is $30,000 or less in any single calendar quarter or over any four consecutive calendar quarters.
- Once you exceed, or expect to exceed, this $30,000 threshold, you are typically required to register.
- Voluntary Registration: Even if you are a “small supplier” (i.e., your revenues are below $30,000), you can choose to voluntarily register for a GST/HST account.
Why Register Voluntarily (Even If You Don’t Have To)?
Voluntary registration offers a significant benefit: claiming Input Tax Credits (ITCs). ITCs allow you to recover the GST/HST that you paid or owe on purchases and expenses related to your commercial activities.
For example, if you pay HST on office supplies or a service you use for your business, and you are registered, you can claim that HST back. This makes voluntary registration very attractive for new businesses or those with significant upfront expenses, as it reduces your operating costs.
When to Register
If you are required to register (i.e., you are no longer a small supplier), you must do so:
- Immediately when your total taxable revenues exceed $30,000 in a single calendar quarter.
- Within 29 days after your total taxable revenues exceed $30,000 over four consecutive calendar quarters.
- If you register voluntarily, you should do so before you start charging GST/HST.
How to Register for a GST/HST Number
The Canada Revenue Agency (CRA) offers several convenient ways to register:
- Online: The easiest and fastest way is through the CRA’s “My Business Account” portal.
- By Phone: You can call the CRA’s business enquiries line.
- By Mail or Fax: By completing Form RC1, Request for a Business Number (BN), and sending it to your tax centre.
When registering, you’ll need to provide details about your business, such as its name, type of business, estimated annual revenues, fiscal year-end, and whether you are a sole proprietor, partnership, or corporation.
Implications of Registration
Once registered, you have new obligations and opportunities:
- Collecting GST/HST: You are required to charge GST/HST on all your taxable supplies of goods and services.
- Claiming ITCs: You can now claim ITCs to recover the GST/HST you paid on your business purchases and expenses.
- Filing GST/HST Returns: You will need to file regular GST/HST returns (monthly, quarterly, or annually, depending on your revenue and election) and remit the net tax collected to the CRA.
- Record Keeping: You must maintain adequate records to support your GST/HST collections and ITC claims.
Registering for a GST/HST number is a fundamental step for many Canadian businesses. Understanding the threshold, the benefits of ITCs, and the registration process will help ensure your business remains compliant and takes full advantage of the tax system. If you are unsure about your obligations, it’s always wise to consult with a tax professional.
