Do I have to Charge GST?Brian Jang ON March 25, 2021
If you are self-employed or considering starting up your own business, you may be concerned and unsure about the tax implications of your business. The rules of GST/ HST may seem daunting or difficult to understand. This article aims to make things clearer for you.
Taxes vary according to province in the following manner:
- Alberta British Columbia, Saskatchewan, Northwest Territories, and Yukon have the GST at 5%
- Ontario’s HST is 13%
- New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island have 15% HST
Do I Have to Charge GST?
The short answer to this is that it depends on the type of business you are operating. Not every self-employed individual is required to charge/ collect the GST/ HST because not all goods or services are subject to GST/ HST. The Canada Revenue Agency (CRA) divides all goods and services into three categories:
- Taxable. Most products fall into this category, as do advertising, legal and accounting services, and hotel accommodation. For these goods and services, GST/ HST must be charged/ collected. Tax credits may be claimed for GST/ HST paid in the production of these goods/ services.
- Zero-rated goods and services include prescription drugs, medical devices, most groceries, and agricultural products. GST/ HST is not charged/ collected. You may be able to claim tax credits on the GST/ HST paid in the production of your goods and services.
- Exempt goods and services include childcare services, dental and medical services, educational services, music lessons and non-profits. You will not charge/ collect GST/ HST, nor will you be able to claim tax credits.
Total Sales Revenue is a Deciding Factor
Although most goods and services are subject to GST/ HST, your sales revenue will help determine if you are required to charge or collect it. If your small business is considered a “small supplier” you will not be required to charge/ collect the GST/ HST. You will no longer be considered a small supplier once your sales revenue reaches $30,000 in a single quarter. This applies even if it occurs in two separate years (IE November 2019 to February 2020). At this point, you will be required to start charging / collecting GST/ HST.
In some cases, you may choose to participate in the GST/HST program even if you are not required to do so. For example, you may decide to do so to ensure proper bookkeeping right from the start. You may also choose to set up your account in advance if you have early indication from sales revenue that you will be experiencing large growth. As a small business owner, it is always advisable to plan ahead.
How to Register
Whether you have reached $30,000 or more in sales revenue, or you simply want to plan ahead, you will register for a GST/ HST account with the CRA. This can be done via the Business Registration Online Program. You will require your business name and address, as well as your Social Insurance Number and information about your business to complete the application.
What Comes Next?
Upon registering and beginning to collect/ charge the GST/ HST, you are required to inform your customers of your tax pricing scheme. This means letting them know whether the GST/ HST is included in your prices or added separately. You must also display the tax rate that the customers are being charged.
Going forward, you will be required to submit a GST/ HST return on a monthly, quarterly, or annual basis. You should consult with your accountant or bookkeeper to see which one your business qualifies for.
At this point, it becomes vital to maintain proper bookkeeping and accounting. Failure to do so could result in unfortunate consequences for your business. At BCJ Group, we can free you from the worry and stress of bookkeeping and accounting so that you can focus on what matters to you: running and growing your business.
To lean more about how we can help you, contact us today!