Understanding Small Businesses
Small businesses are essential to the economy, offering diverse products and services and creating jobs. As a small business owner, understanding your tax obligations, including when to start collecting Goods and Services Tax (GST), is key to staying compliant.
What is GST/HST?
The Goods and Services Tax (GST) is a 5% tax applied to most goods and services in Canada. Some provinces combine GST with their Provincial Sales Tax (PST) to form the Harmonized Sales Tax (HST), with rates varying by province.
Does My Small Business Need to Collect GST/HST?
Not all businesses are required to collect GST/HST. This depends on the type of supply you’re selling and your sales volume.
- Taxable Supplies: GST/HST must be charged, collected, and remitted. Input tax credits (ITCs) can be claimed for GST/HST paid on production costs.
- Zero-Rated Supplies: GST/HST is not charged, but ITCs can still be claimed. Examples include medical devices and exports.
- Exempt Supplies: GST/HST is not collected, and ITCs cannot be claimed. Examples include child care services.
Who Should Register for a GST/HST Number?
You must register for GST/HST once your sales exceed $30,000 in any four consecutive quarters, as you’re no longer considered a “small supplier.”
Voluntary Registration for GST/HST
You may want to register voluntarily if:
- You want to establish proper recordkeeping.
- You expect your sales to exceed the $30,000 threshold soon.
- You sell zero-rated supplies and wish to claim ITCs.
- You incur significant upfront costs, and claiming ITCs could improve cash flow.
Steps to Collecting and Filing GST/HST
- Apply for a GST/HST Number: Register online through the Business Registration Online (BRO) program.
- Collect GST/HST: Charge the correct GST/HST rate based on your location and inform customers on receipts.
- File a GST/HST Return: Report the GST/HST collected by filing with the CRA.
- Pay the Taxes Collected: Remit the collected taxes to the CRA on time to avoid penalties.
Conclusion
Knowing when to start collecting GST is crucial for compliance. By understanding the criteria for registration and maintaining accurate records, you can confidently manage your GST/HST obligations and focus on growing your business. For taking professional advice contact wealthywaveaccoutning.ca.
