GST/HST Part 1 – Registration

Today?we are going to talk about the GST/HST program. I’ve been getting so many questions lately and there seems to be a lot of misinformation out there. So let’s get you on the right path!

First we’re going to focus on registration:?

• When do you need to register
• What do you need to know about how the GST/HST program works

If you like video content, you can watch the live I did recently on this topic (link HERE)

But I’m going to give you some extra goodies here ??

Is what you’re selling deemed taxable?

The very first step is to identify what you are selling, and where it falls in the GST/HST category. The GST/HST program is based on legislation and it has some very specific rules. We need to understand two terms:?taxable supply vs exempt supply.

Remember, not all goods and services are subject to tax: the flour, sugar and eggs purchased to bake a cake are zero-rated (you’re not paying any GST/HST on the purchase) whereas purchasing a prepared cake would have GST/HST added to the price. Or another example, if you are coaching Canadian entrepreneurs, you’re offering a taxable service; if you are teaching children music, you are offering an exempt supply.

If you are unsure which category you are in, CRA’s site?HERE?has guidance on what falls under the definition as exempt and what falls under the definition as taxable.?

If you are selling something that falls under the definition as an exempt supply, you do not need to register for the GST/HST program (and in fact, are not even allowed to).?

If what you are selling falls under the definition as taxable (including zero-rated) you will be required to register, and to charge and collect the GST/HST on your sale of taxable supplies, unless you meet the definition of a small supplier.

Mandatory registration and how the $30,000 limit actually works

The second step is one of the BIGGEST misconceptions that I see causing confusion for so many entrepreneurs!

Many seem to know about the $30,000 small supplier limit around GST/HST, but there’s a lot of misinformation about how it actually works. The big takeaway I want every Canadian business owner to know is that it is?NOT?$30,000 per calendar year; the rules actually state that you need to consider your total sales over the?past four calendar quarters.?

If your total sales over that period are less than $30,000, you can fall under the small supplier exemption and are not required to register for GST/HST. If you have exceeded, or are about to exceed $30,000, you need to pay attention and get registered. If you exceed $30,000 over multiple quarters, you have to get registered by the end of the following month.? If you hit the $30,000 all in one quarter, you need to register immediately.

Here’s a graphic that explains this:

And here’s an example:?We are currently in September 2022. If you’re trying to decide whether you fall under the small supplier limits, you need to tally up your total sales since October 1st 2021 through now (and this will carry through the end of September 2022). If you are reaching total sales of $30,000, or have exceeded $30,000, over the total time period (four calendar quarters), that means you’re no longer a small supplier and need to register for the GST/HST program, and start charging GST/HST, on your sales before the end of October 2022.

If you hit the $30,000 all in one quarter, so say you are just a baller and you have ramped up and you have hit $30,000 between July 1, 2022 and September 30, 2022, well my friend, you need to register immediately as the rules state you need to get registered and start charge GST/HST on the invoice that took you over the $30,000.

Link?HERE?for how to get registered with CRA.

And a very important caveat:?no stress here please!?If you are realizing you should have already been registered, please don’t panic. Just get registered now and start charging going forward. If you’re really worried, you can book a 15 minute call with me HERE?and I’ll help you navigate what to do to get on the right path.

You must be registered for GST/HST in order to charge GST/HST.

I’ll go more into the reasons why below, but for now, if you’ve determined from above that you need get registered, definitely hit the links above to do some more research and get the process going.

Voluntary Registration

Before we finish up, I want to focus more on registration by highlighting a few more common misconceptions, and providing you with some tips for when the time comes to register.

We talked about mandatory registration and the small supplier rules, but please know that you don’t have to wait for your sales to exceed the $30,000 over the past four calendar quarters to jump into registration and get the GST/HST program set up for your business.? As long as you are selling, or intend to sell, something that falls under the definition of a taxable supply, you can voluntarily register.

Even if you have low sales.

Even if you have NO sales yet.

As long as what your business is selling (or will be selling) something that qualifies as a taxable supply (see above).

If you want to register your business for the GST/HST program early, you can do so. It’s called?voluntary registration. You would follow the same steps for registration as I outlined above, but just tell them you are doing so under voluntary registration.

Why would you want to?

There’s?a few reasons some?business owners might want register their business for GST/HST before they are required to.

One reason would be if you have a lot of expenses or start up costs that are going to have GST/HST attached to them. This is because, once you are a GST/HST registrant, you get to claim back any GST/HST you pay out on your expenses, and get it refunded when you file your GST/HST return.

So if you're buying some large pieces of equipment, significant amounts of supplies and raw materials, or are hiring a number of contractors who are registered for GST/HST, you may decide to register before you are required to in order to save on those funds.

I've also spoken with entrepreneurs who just like to get organized at the beginning. They know that they are eventually going to have to register their business under the program, and prefer to register right at start-up so that they can get everything set up and squared away as they're setting up their invoicing and bookkeeping systems. Often these entrepreneurs feel like they’re going to have a little more time on their hands at the beginning of their business journey, and they just want to get everything set up with the sales tax included so that they don't have to try to navigate it later when things are busier in their business.

Tip when registering

Finally, I’ll leave you with a?tip about registering.

When you register, they will ask you how often you want to file your returns. I usually recommend entrepreneurs to select annual registration. The reason being that this will mean you will be preparing and filing your GST/HST return at the same time as your income tax return. For most entrepreneurs, this will mean a higher success rate with filing returns on time.? Please set yourself up to succeed so you don’t file your returns late. CRA will charge you penalties and interest on any amount due, and in my opinion, that’s such a crappy way to spend money.

If you need help getting a system set up, hire help!

If you’d like to explore these topics in more detail, you can join the waitlist for the next round of? From Overwhelmed to Empowered - Accounting and Tax Toolkit for Small Business?where we guide you through the knowledge and systems you need to manage your accounting and to make empowered decisions about your business. Or you can book onto my calendar at any time to chat about your business and the benefits that onboarding my team can bring.

That's it for now friend!