GST (or Goods and Services Tax) is a tax that Canadians pay on most goods and services. Most provinces combined their GST and PST (Provincial Sales Tax) into what we call HST (Harmonized Sales Tax). Businesses or self-employed individuals who make more than $30,000 are required to charge GST/HST to their customers and report that to the CRA. However, you can recover the GST/HST that you paid on expenses related to your business.
You can choose to register to collect GST/HST at any time, but after you have invoiced for a total of $30,000 in 12 consecutive months, you are obligated to begin charging GST/HST (note: those 12 consecutive months may occur across different calendar years - you don't start counting from $0 every January 1). You do not have to pay GST/HST on previous income, but you should begin charging HST/GST on every dollar you earn after reaching $30,000. You have 29 days after hitting the $30,000 threshold to register for your GST/HST number.
The income that makes up this $30,000 does NOT include grant money received, or income you received where the person who paid you deducted income tax from you (ie – you were considered an employee). This $30,000 threshold is also calculated on a consecutive basis, not just for a calendar year – meaning it doesn’t reset on January 1st. If you invoice for $15,000 in December 2018 and then $5,000 each month in Jan – March, then you would be obligated to begin charging HST on any invoice after the invoice of $5,000 in March.
Some goods and services are not taxable, so certain professions, such as music teachers, tutors, child care workers, and most medical professionals do not have to charge for GST/HST. A complete list of GST/HST exempt supplies can be found here.
There are three ways to register:
Note: You will need to have your SIN number and your most recent Notice of Assessment on hand in order to register online
By Mailing a completed RC1 form to your local tax office (if you are in Toronto, it’s most likely the Sudbury Tax Office). You can find the form here.
You can also register by calling CRA at 1.800.959.5525.
Are you a sole proprietor (not an incorporated business)?
A sole proprietor is a business owned by one person and that is not incorporated. Most 'gig workers' are sole proprietors. If you are a sole proprietor registering for HST/GST, you must first register for a business number, and then immediately register that business number for GST/HST.
Once you have your business number registered for GST/HST, every time you invoice someone, you simply add the % GST/HST rate of the customer’s province on top of the amount you are charging to that customer.
Different provinces have different tax rates. For example, “Newfoundland has 15% HST so you would charge 15% HST. British Columbia no longer has HST – so you would only charge 5% GST to any customers in Newfoundland. For customers in Ontario – you charge 13% HST.”
A list of sales tax rates by province can be found here
If you are invoicing a customer that is outside of Canada – you do not charge them GST/HST. Keep a note of this income as you need to report it as income exempt from GST/HST.
If you are being reimbursed for expenses, that is not considered income and you do not charge GST/HST on that.
If you are charging GST/HST on an invoice – you MUST include your business number on that invoice.
There are two methods to track and report you GST/HST: The Regular Method and The Quick Method. The Quick Method may work for specific situations beyond the scope of the information on this page, but for most arts workers or small theatre companies, the Regular Method, filed once a year, be the most straightforward way to calculate and report your GST/HST.
To make filing your GST/HST as simple as possible, it is important to keep track of the GST/HST you collect throughout the year as well as the business expenses you paid GST/HST on for which you can claim Input Tax Credits (which will be deducted from the GST/HST that you have to remit to the government.)
Once you are registered for GST/HST – CRA will send you a remittance request letter that will look like this:
The remittance slip will give you the following information:
- Your name and address
- Your business number
- The period you are reporting on
- The due date for filing
- The Access code for filing online
You can then use this information to NETFILE your GST/HST return online here
You will need to provide the following information – so remember to keep track of this during the year:
- Line 90: Income you earned on which you collected GST/HST
- Line 91: Income you earned that was exempt from GST/HST (examples would be if you had foreign customers or received government grants)
- Line 102: Your associates taxable sales (this is more often than not, zero)
- Line 105: GST/HST Collected
- Line 108: HST ITC – this is GST/HST that you paid on expenses that were related to your business. In some cases, CRA may want to see how you got to the amount of HST/ITC on expenses – so it would benefit you to keep a spreadsheet tracking the following information on your expenses (date paid, to whom paid, total amount, HST on expense)
- Line 110: Installments paid (to be discussed below)
- CRA is highly encouraging people to pay their GST/HST online.
- If you’re old-fashioned, you can still pay in person at your bank.
Your remittance request will also include a remittance slip that looks like this:
You can take this slip to your bank and pay it by a teller.
If you owe more than $3,000 at the end of your reporting period, CRA requires you to pay your HST in instalments during the reporting period. That roughly equates to $23,000 of income if you’re charging 13% HST or $60,000 if you’re charging 5% GST.
Generally, CRA will assume that you are earning the same income and GST every year, so they would expect that your quarterly instalments would be a quarter of what you paid the previous year. If you owed $4,000 in GST/HST last year, you should be paying $1,000 on March 15, Jun 15, Sep 15 and December 15th. If you’re not expecting to collect more than $3,000 in GST/HST in one you, you are not obligated to pay instalments that year. You can pay instalments online just as you would pay your GST/HST due as listed above.
- GST/HST is not to be confused with income tax. Income tax are taxes you pay on your income earned and income taxes are required to be filed by every Canadian resident annually. Your income tax is associated with your SIN number. Your GST/HST tax is associated with your business number
- Only 50% of meals are allowed deductible expenses so you are only allowed to use 50% of the GST/HST you paid on business related meals
http://www.financiallit.ca/ - a helpful resource with tips and tricks about accounting principals and what you should know about taxes and reporting.