When Do You Need to Charge GST/HST in Canada?

The Goods and Services Tax (GST) and Harmonized Sales Tax (HST) in Canada are federal consumption taxes applied to most goods and services. These taxes function as a value-added tax, applied at each stage of the supply chain. Businesses collect GST/HST on their sales and can recover the tax paid on their purchases.

Determining Your Obligation to Charge GST/HST

Determining if you must charge GST/HST depends primarily on whether you qualify as a “small supplier.” A small supplier’s total revenue from taxable supplies, before expenses, is $30,000 or less in any single calendar quarter and over the last four consecutive calendar quarters. For public service bodies, the threshold is $50,000.

Certain businesses must always register and charge GST/HST, regardless of revenue. This includes taxi and ride-sharing services, which must register from their first dollar of taxable revenue. Non-resident businesses selling taxable goods or services in Canada are also required to register and collect the tax, even if their sales fall below the small supplier threshold.

Even if a business qualifies as a small supplier and is not mandated to register, they can choose to register voluntarily. Voluntary registration allows a small supplier to claim Input Tax Credits (ITCs) for the GST/HST paid on their business expenses. This can be financially beneficial, especially for businesses with significant start-up costs or those that regularly incur GST/HST on purchases. Once registered, the business must charge and collect GST/HST on all taxable supplies.

Identifying Taxable Supplies

Most goods and services supplied in Canada are considered taxable supplies and are subject to the standard GST/HST rate. This broad category includes items like clothing, electronics, restaurant meals, and professional services such as legal or accounting advice. Businesses providing these goods or services must collect GST/HST from their customers.

Some supplies are considered zero-rated, meaning they are taxable at a 0% rate. While no GST/HST is collected from the customer, businesses making zero-rated supplies can still claim ITCs for the GST/HST paid on related expenses. Examples include basic groceries, prescription drugs, certain medical devices, and most exports of goods or services from Canada.

A distinct category is exempt supplies, which are not subject to GST/HST. Businesses providing exempt supplies do not collect GST/HST on those sales and cannot claim ITCs for the GST/HST paid on expenses incurred to make these supplies. Common examples include:
Certain financial services
Residential rents
Certain health care services
Some educational and child care services
The GST/HST paid on expenses for exempt supplies becomes a cost to the business.

Registering for a GST/HST Account

To register for a GST/HST account, a business needs to gather specific information. This includes:
The business’s legal name
Its nine-digit Business Number (BN)
Physical and mailing addresses
Contact information for the owner or authorized representative
Primary business activity
Fiscal year-end
Projected annual revenue

Businesses must also choose a preferred reporting period for their GST/HST returns: monthly, quarterly, or annually. The reporting period usually depends on the business’s total annual taxable supplies. For instance, businesses with annual taxable supplies exceeding $1.5 million typically file monthly, while those with $50,000 or less may file annually.

Several methods are available for registering a GST/HST account with the Canada Revenue Agency (CRA). The most common method is online through the CRA’s My Business Account portal. Businesses can also register by phone or by mail, requiring the completion and submission of Form RC1.

Collecting and Remitting GST/HST

Once registered, a business must charge GST/HST on sales. When invoicing customers for taxable goods or services, the GST/HST amount must be clearly shown as a separate line item. The correct rate, which varies by province or territory, must be applied. For example, some provinces have a 5% GST, while others have a harmonized HST rate ranging from 13% to 15%.

Businesses can reduce the GST/HST owed to the CRA by claiming Input Tax Credits (ITCs). ITCs represent the GST/HST paid on eligible business expenses and purchases, such as office supplies, rent, or utilities. By subtracting total ITCs from the total GST/HST collected on sales, businesses determine the net amount payable or refundable for a reporting period. Maintaining accurate records of all GST/HST paid and collected is essential for calculating ITCs.

After calculating the net GST/HST for a reporting period, businesses must file a GST/HST return and remit any net amount owing to the CRA. Returns can be filed online through the CRA’s My Business Account, using GST/HST Netfile software, or by mail. Payment can be made online through financial institutions, via My Business Account, or by mail with a cheque. Due dates for filing and payment depend on the assigned reporting period; monthly and quarterly filers typically have one month after the period ends, and annual filers have three months.