Alberta GST: A Breakdown for Your Business
Understand the core mechanics of the federal GST for your Alberta business. This guide clarifies your financial obligations and the flow of tax through your operations.
For businesses operating in Alberta, the federal Goods and Services Tax (GST) is a part of the Canadian tax system. Unlike many other jurisdictions, Alberta does not have a provincial sales tax (PST), which simplifies tax collection for companies. Businesses and consumers are only subject to this single, federal-level tax on most goods and services. The current GST rate is 5% and applies to most transactions within the province.
GST Registration Requirements in Alberta
A business must register for a GST account with the Canada Revenue Agency (CRA) based on its revenue. The “small supplier” rule states a business is not required to register if its total worldwide revenue from taxable goods and services is $30,000 or less in a single calendar quarter or over four consecutive calendar quarters. This calculation includes revenue from sales, leases, and other supplies but excludes items like the sale of business goodwill or certain financial services.
Once a business’s revenue exceeds the $30,000 threshold, it must register for a GST account. The effective date of registration is the date the business surpassed the threshold. For example, if a company’s revenues tip over the $30,000 mark in a specific quarter, it must begin collecting GST on the supply that made it exceed the threshold. This requirement applies to most businesses, including sole proprietorships, partnerships, and corporations.
Some businesses with revenues below the $30,000 threshold may choose to register voluntarily. Voluntary registration allows a business to claim Input Tax Credits (ITCs) to recover the GST paid on business expenses. Without a GST registration, a business cannot claim these credits, which can represent a significant cost recovery.
Calculating and Claiming Input Tax Credits
Input Tax Credits (ITCs) are the mechanism by which GST-registered businesses can recover the GST they pay on purchases and expenses used in their commercial activities. This system ensures that the tax is ultimately paid by the final consumer, not by the businesses in the supply chain. When you file a GST return, you deduct the ITCs from the GST you have collected. The result is your net tax, which is either remitted to the CRA or refunded if ITCs exceed the GST collected.
For an expense to be eligible for an ITC, it must be directly related to your commercial activities. Common eligible expenses include commercial rent, office supplies, legal and accounting fees, utilities, fuel costs, and maintenance. However, some expenses have limitations; for instance, ITCs for meals and entertainment expenses are limited to 50% of the cost.
To illustrate, a graphic design business in Alberta collected $1,500 in GST from its clients in a reporting period. During that same period, the business paid $400 in GST on eligible expenses like new software, office rent, and professional association fees. The business can claim the full $400 as ITCs. The net tax calculation would be $1,500 (GST collected) – $400 (ITCs) = $1,100, which is the amount remitted to the CRA. You must maintain thorough records and receipts to substantiate all ITC claims.
Not all goods and services are subject to GST, which affects ITC claims. Supplies are categorized as taxable, zero-rated, or exempt. Taxable supplies are those subject to the 5% GST rate. Zero-rated supplies, such as basic groceries and prescription drugs, are taxed at a rate of 0%. Businesses making zero-rated supplies can still claim ITCs on their related expenses. Exempt supplies, which include services like residential rent and most health care services, are not subject to GST, and businesses providing them cannot claim ITCs on related expenses.
Filing and Remitting GST
Once registered, a business must file regular GST returns with the Canada Revenue Agency. The CRA assigns a reporting period based on the business’s annual revenue from taxable supplies. Businesses with annual revenues of $1.5 million or less are assigned an annual filing period, those with revenues between $1.5 million and $6 million are assigned a quarterly period, and businesses with revenues exceeding $6 million must file monthly.
Filing and payment deadlines are tied to these reporting periods. For monthly and quarterly filers, the return and payment are due by the last day of the month following the end of the reporting period. For example, a quarterly period ending March 31 has a deadline of April 30. For annual filers, the return and payment are due within three months after the end of the fiscal year. An exception exists for individuals who are annual filers with a December 31 fiscal year-end; their payment is due by April 30, but their return filing deadline is extended to June 15.
Businesses have several options for submitting their GST returns and payments, though most are required to file electronically. The most common method is through the CRA’s “My Business Account” online portal. Other electronic options include GST/HST NETFILE or filing through compatible third-party accounting software. Payments can be made electronically through online banking, the CRA’s “My Payment” service, or at a financial institution.