GST/HST is a sales tax that individuals collecting more than $30,000 are required to charge to their customers.
The sales tax that you collect must be reported and paid to CRA, less any GST/HST that was paid on expenses related to earning that income.
Once you have invoiced for a total of $30,000 in a 12-month consecutive period, you are obligated to begin charging GST/HST. You do not have to go back and charge GST/HST on the previous $30,000 earned, you only begin charging on the first dollar after reaching $30,000.
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). The income is calculated on a consecutive basis – 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.
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 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)?
If you are a sole proprietor (you are not an incorporated business) you will first be registering for a business number, and then immediately registering that business number for GST/HST. CRA is going to want to know how often you want to file your GST/HST and using which method. It’s recommended that you begin with annual filing and the Long Method as they are the most straightforward reporting methods. For specific situations beyond the scope of this info bulleting – you may want to consider quarterly filings or using the Quick Method.
Once you have your business number registered for GST/HST you simply add the % GST/HST rate of the customer’s province on top of the amount you are charging to that customer. 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.
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.