BUSINESS TAX 101: Why/When Do I Need To Apply For A GST/HST Account?

 

In Canada, most goods and services are eligible for at least one sales tax: the Goods and Service Tax (GST)– some provinces are also subject to the Harmonized Sales Tax (HST). Most Albertans mentally factor in the 5% GST charge to day-to-day transactions, but there is more pressure on businesses to follow federal regulations. If you own or operate a business, it is vital that you do not overlook sales tax requirements. Review the Liu & Associates crash course on GST/HST accounts and contact us today with any questions or concerns.

 

WHAT IS A GST ACCOUNT?

In order to track business taxes, the Canada Revenue Service (CRA) maintains a database of business numbers– known in this case as GST numbers. Your number corresponds to your GST account, through which your business will remit taxable amounts and file returns. Collecting and charging GST falls to the business and they are responsible for mistakes, oversights and any resulting consequences.

DOES MY BUSINESS NEED TO REGISTER?

Regarding GST, businesses fall into two categories: those that are small suppliers and those that are not. The following summarizes the small supplier threshold of taxable supplies for various types of business:

  • Most businesses are considered small suppliers if they do not exceed a $120,000 yearly threshold amount;
  • Most charities, public institutions and service bodies are considered small suppliers if they do not exceed a $200,000 yearly threshold amount;
  • Two notable exceptions are non-residents and taxi/ride share operators, who often qualify as small suppliers regardless of threshold.

AS A SMALL SUPPLIER, WHY SHOULD I REGISTER?

Small suppliers are not legally obligated to collect, charge, remit or file any GST amounts. Still, there can be a major advantage to voluntarily registering for a GST account as a small supplier. Think of the taxes your business pays on expenses, raw material costs or the services it uses. Much of this GST can be refunded as input tax credit if you have already started an account with the CRA, regardless of your business’ size.

The details above are only a brief summary of the complex and thorough GST/HST regulations set out by the government. If the growth and health of your business is on the line, always consult with professionals like the team here at Liu & Associates. Contact or visit us today!

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