Jeremy Scott Tax Law

GST/HST written in a notebook on a wooden desk with pen, notes, and calculator for business considering requirements to register for GST and register for HST
GST/HST written in a notebook on a wooden desk with pen, notes, and calculator for business considering requirements to register for GST and register for HST

The Goods and Services Tax (GST) and the Harmonized Sales Tax (HST) apply to the sales of goods and services in Canada and, when required, must be remitted to the Canada Revenue Agency (CRA). Though certain exceptions and the types of supplies a company provides determine whether a company must register, the small supplier threshold is also a determining factor for most small businesses. For help deciding whether your business has crossed the small supplier threshold and must register for GST and register for HST, consider contacting an experienced Canadian tax lawyer from Jeremy Scott Law. Call (902) 403-7201 to schedule a consultation.

What Is a Small Supplier?

According to the Canada Revenue Agency, a small supplier is a business that has revenue from worldwide taxable supplies of less than or equal to $30,000, or $50,000 for public agencies, in one calendar quarter or over the most recent four consecutive quarters. This calculation does not include considerations for the sale of the business’s goodwill, supplies of financial services, and supplies through the sale of capital property. Public institutions and charities are also small suppliers if their gross revenue is at or below $250,000.

Small Suppliers Who Must Register for GST/HST

Small suppliers are not required to register for GST or register for HST. However, once a small supplier reaches the $30,000 threshold in one out of the previous four quarters or in total over the previous four quarters, that business is no longer considered to be a small supplier and, therefore, must register and begin collecting and remitting the GST/HST for all applicable supplies. 

If the supplier exceeded the threshold in a single quarter, the effective date for registration will be the date on which the supplier crossed that threshold. If the supplier exceeded the threshold over the previous four quarters, the registration effective date will be the start of the month after the supplier crossed the threshold.

Small Suppliers Who May Voluntarily Register for GST/HST 

All suppliers who meet the definition of small suppliers and make taxable sales, leases, or other supplies in Canada may voluntarily register for GST and register for HST. One benefit to registering is the opportunity to claim input tax credits (ITCs) on the taxes paid or payable as related to a business’s activities. 

Taxable Supplies

When a small supplier voluntarily registers for the GST/HST, the tax can only be collected on taxable supplies. The following are examples of taxable supplies for which a non-exempt business must collect and pay the GST/HST:

  • Soft drinks, candies, and potato chips
  • Clothing and footwear
  • Barber and hairstylist services
  • Hotel accommodations
  • New housing 
  • Commercial real property rentals or sales
  • Automobile sales or leases 
  • Car repairs
  • Taxi or commercial ride-sharing services
  • Advertising (except that provided for non-residents who are not registered for the GST/HST)
  • Legal and accounting services
  • Franchises

Zero-rated Supplies

In Canada, some supplies are subject to the GST/HST only at a rate of zero percent. Though a business does not charge the GST/HST on these zero-rated supplies, it may still be able to claim ITCs for the taxes paid or payable on the property or services acquired for the purpose of providing these supplies. The following supplies are taxable at zero percent:

  • Basic groceries (e.g., milk, bread, vegetables, etc.)
  • Agricultural products (e.g., grain, dried tobacco leaves, raw wool, etc.)
  • Most livestock
  • Most fishery products (e.g., fish for human consumption)
  • Prescription drugs and drug-dispensing services
  • Medical devices (e.g., hearing aids and artificial teeth)
  • Feminine hygiene products
  • Exports (most goods and services that require the GST/HST in Canada will be zero-rated upon export)
  • Many transportation services when either the destination or the origin is outside Canada

Exempt Supplies

Consumers do not notice a difference between exempt supplies and zero‑rated supplies because no tax is collected for either. However, registrants not only do not collect the GST/HST on exempt supplies of property and services, but they cannot claim ITCs for those taxes paid or payable on purchases of supplies used for making the exempt supplies. If a business only provides exempt supplies, then that business also cannot register for the GST/HST. 

Some examples of exempt supplies include the following:

  • Sale of property that was most recently used as a place of residence for an individual 
  • Long-term residential rentals 
  • Most medical, health, and dental services 
  • Child care services for children up to 14 years of age for less than 24 hours per day
  • Most domestic ferry services
  • Legal aid services
  • Many educational services 
  • Tutoring services to individuals in courses for school credit 
  • Music lessons
  • Most financial institution services (e.g., loans or deposit accounts)
  • Insurance policies 
  • Most property and services provided by charities and public institutions
  • Certain property and services provided by non-profit organizations, governments, , municipalities, and other public service bodies 

Steps for Collecting the GST/HST and Filing a Return

The first step to collecting the GST/HST is to determine whether or not your business is required to register or would benefit from registering. Small suppliers that either cross the threshold or register voluntarily will want to know what steps to take next in order to maintain compliance with CRA filing requirements. A Canadian tax lawyer from Jeremy Scott Law may be able to help make this initial determination and guide the steps for complying with registration requirements.

Step 1: Apply for a GST/HST Account

A business must first have a business number (BN) before it can register for a GST/HST account. To apply for the tax account, the supplier will need the effective date, fiscal year, total annual revenue, and the business’s basic information. The basic information for a business includes the business owners last names, social insurance numbers (SIN), dates of birth, and postal code of residence. Also required is the business name, BN, business or organization type—sole proprietor, partnership, corporation, registered charity—physical address, mailing address if different, and a description of the business’s activity.

After the application has been properly submitted, the account number will be sent either electronically or by mail. This will serve as confirmation that registration is complete.

Step 2: Collect the GST/HST

Except for zero-rated supplies, the tax rate for taxable supplies varies depending on the location in which the supply is delivered to the consumer. Currently, the rates are 13 percent HST (in Ontario), 15 percent HST (in Prince Edward Island, Nova Scotia, New Brunswick, and Newfoundland and Labrador), and 5 percent GST (in all other provinces or territories). Carefully calculate the tax based on the place and type of supply, and then collect the appropriate amounts from customers. Inform customers about the tax percentage and whether the amount is included or added to the price. 

Step 3: File a GST/HST Return

New registrants with reporting periods that begin in 2024 must file returns electronically or face a possible penalty. First, know when to file. Then, calculate the net tax and know what information to include in the return. After all portions are complete, file using the appropriate method. Maintain records for a minimum of six years. 

Step 4: Pay the Collected Taxes 

The payment deadline depends on the filing period, but most payments are due along with the return when it is filed. Payment deadlines may be different for some filers. All GST/HST due on the submitted invoices must be paid whether or not the tax payment has been collected from the customer.

Contact a Tax Lawyer for Help Today

Due to the complexities of Canadian business tax obligations, small suppliers may want to speak with a tax lawyer who can explain what is applicable to their business. If you need to determine whether you have crossed the small supplier threshold and must register for GST and register for HST, consider consulting with an experienced Canadian tax lawyer from Jeremy Scott Law. Call (902) 403-7201 to schedule a consultation today.