GST/HST Taxes: What Businesses Need to Know
The GST/HST (goods and services tax/harmonized sales tax) applies to most goods and services in Canada. New Brunswick, Newfoundland and Labrador, Nova Scotia, Ontario, and Prince Edward Island use the HST.
Here’s what you need to know about these taxes as businesses or professionals.
How to register for a GST/HST account
You don’t have to register for a GST/HST account if your business earns less than $30,000 in four consecutive quarters. As an option, some small suppliers may choose voluntary registration.
A calendar quarter is a three-month period that starts on the first day of January, April, July or October. The taxes are charged on the supply of more than $30,000. Registration for the tax account must occur within 29 days.
If earnings exceed $30,000 within the previous four consecutive quarters, but not in a single calendar quarter, the business or professional is no longer a small supplier.
You must apply the appropriate tax starting the month after the business or professional stopped being a small supplier. Additionally, you must register for the account within 29 days.
Voluntary GST/HST registration for small suppliers
Small suppliers who opt for voluntary GST/HST registration must:
- Charge, collect and remit taxes on all supplies of goods and services subject to GST/HST
- File GST/HST returns
- Stay registered for at least a year unless business ends
Those registered can use ITCs (input tax credits) to recover GST/PST on purchases and operating expenses.
Taxable, zero-rated, and exempt supplies
GST/HST applies to most property and services sold or imported into Canada. To illustrate, here are some examples of taxable supplies:
- Sales of new housing
- Sales and lease of automobiles
- Soft drinks, candies and packaged snacks
- Clothing and shoes
- Taxi and limousine transportation
- Hotel accommodation
- Barber and hairstylist services.
A few types of zero-rated supplies are:
- Agricultural products
- Fish meant for human consumption
- Prescription drugs
- Feminine hygiene products
- Transportation services where the origin or destination is outside of Canada.
For a start, exempt supplies include:
- A sale of housing last used as a place of residence
- Long-term rentals of accommodation
- Child-care services for children less than 14 years old, for periods of less than 24 hours
- Music lessons
- Legal aid
- Public services such as public transit and water distribution.
Filing GST/HST returns
GST/HST returns may be filed monthly, quarterly, or annually. Form GST34-2 will show personal due dates. Above all, the returns must be filed even if no net taxes apply and no business transactions took place.
Calculate your net tax for each reporting period and report it on GST/HST returns. Calculate it by finding the difference between:
- GST/HST collected or collectible on taxable supplies
- GST/HST paid or payable on business purchases and expenses
The GST/HST applies to automobile benefits at different rates according to the province. Participating provinces with variable rates are Prince Edward Island, New Brunswick, Newfoundland and Labrador, Nova Scotia, and Ontario. For non-participating provinces and territories, the automobile operating expense benefit GST/HST is calculated at 3 percent.
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