Guide to GST and HST for Businesses

When it comes to running a business and doing its taxes, there is a lot to figure out.

- What’s the difference between GST and HST?
- When do you start charging GST/HST?
- What do you do with the GST/HST that you’ve collected?

Read on for answers to all these questions! The blog is here to guide you through GST and HST for businesses.

*This was written using the information on Canadian taxes. If you’re from somewhere else, make sure to double check that it works the same where you’re from!*

What the Difference is Between GST and HST

GST stands for Goods and Services Tax whereas HST stands for Harmonized Sales Tax. In truth, they’re not all that different. GST is a 5% tax that is applied to almost all taxable products or services in Canada. HST replaces GST in some provinces and territories that chose to combine GST and PST (Provincial Sales Tax), creating the HST. 

GST is through the federal government, meaning it applies to all of Canada. Some provinces and territories chose to make it their only sales tax, whereas some provinces and territories also have PST. Out of those places, some choose to make it a little more simple by combining PST and GST into HST.

Does that make sense? Put simply, HST is just GST plus PST.

Which Provinces and Territories Charge Which?

Depending on where your business is, you need to know which tax you’ll be charging.

All provinces and territories collect GST. PST/RST/QST are on retail items on top of GST. Example: Business Services such as coaches, agencies, lawyers, only charge GST. Clothing retailers charge PST/RST/QST.

The provinces and territories that only charge GST are Alberta, Northwest territories, Nunavut, and Yukon. This means that the sales tax in these places is only 5%.

The provinces that charge HST are New Brunswick, Nova Scotia, Newfoundland and Labrador, Prince Edward Island, and Ontario. All of these provinces then have a 15% sales tax, except Ontario which charges 13%.

What about Quebec, British Columbia, Manitoba, and Saskatchewan? These provinces charge both GST and PST, they just have not combined them into HST.
*Check your local province guidelines to confirm what you need to do or book a call with me

When to Start Charging GST/HST

You are required to register for and start charging the GST/HST once you aren’t a “small supplier” anymore, but what does that mean? 
According to TurboTax, your business is a “small supplier” until your revenue (before expenses) is more than $30 000 in a single calendar quarter (this means three consecutive months) or it is more than $30 000 in the past four calendar quarters (this is not a calendar year).

It’s important to know the difference between a calendar year and four quarters. 

“For example, if your business brought in more than $30K between July 1 and June 30 the following year, you’ve passed the threshold as a small supplier even though your revenue was less than $30K each calendar year.” - TurboTax 

What to do with GST/HST Once You’ve Collected It

First, make sure you have accurate records of all that’s been collected for GST/HST. According to the Government of Canada website, your records must be detailed enough that they allow you to calculate three things:

• The amount of GST/HST you’ve collected

• The amount of GST/HST paid and payable on your eligible business purchases and expenses

• The amount of tax to be refunded, rebated, or deducted from your net tax

Accounting software is good for tracking this. Xero is one that has specific reports that tell you what amounts to put in what box on the return.

It’s standard to keep your records for six years. That means you should have the past six years of your business’s GST/HST recorded and kept somewhere safe. 

“Once you’ve collected the GST/HST you must remit that amount to the government based on the schedule you have. That schedule could be monthly, quarterly, or annually.” - Signal Operations 

Keeping track of how the sales taxes work in different provinces and territories can seem complicated at first, especially if your business spans beyond one. So many acronyms! Still, once you learn what each of them means you’ll realize they’re not all that different. Take your time, do your research, and eventually, you’ll start to notice that it’s not quite as complicated as it seems!

Does your province or territory charge GST or HST? Let us know in the comments below!

P.S. Have a question? Need someone to help you navigate your finances? Book a discovery call!