If you’re self-employed, freelance, or run any kind of business in Canada, you’ve probably heard that you have to register for the HST/GST once you make more than $30,000.
But what exactly does that mean, what income counts toward the limit, and how do you do it?
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In this, part one of a two-part Tip about the GST/HST, all your questions of ‘When and How’ will be answered.
When do you have to register?
As most people who are self-employed, freelance, or running a business in Canada, there is an income limit below which you don’t have to be registered for the GST/HST. That limit, known as the Small Supplier Threshold, is $30,000 per year (specifically: in four consecutive calendar quarters). If your revenue falls below this level you are considered to be a ‘small supplier’ and therefore not obliged to register.
Once you cross the Small Supplier Threshold you must get a GST/HST number and start charging your customers and clients.
Please note that when we say four consecutive calendar quarters, that doesn’t mean they all have to fall within the same calendar year. For example, if you make a major $15,000 sale in December and another $15,000 in January, you have just crossed the threshold. December and January fall within consecutive calendar quarters (fourth quarter of one year, and the first quarter of the subsequent year), so it’s time to register.
What counts toward the limit:
• Your gross income (meaning, before deducting business expenses) from freelance or self-employment.
What doesn’t count:
• Income that isn’t from self-employment (i.e., salary from a job, investment income, or social support);
• Grants that do not require you to create a work and give it back to the grantor;
• Revenue from sales that are ‘exempt supplies,’ i.e not subject to GST/HST, such as financial services or music lessons.
Once you cross the threshold, it is your responsibility to register voluntarily. The government won’t send you a notice or a warning – not right away, at least.
If it’s time (or past time) for you to register for the GST/HST, the good news is that it’s easy to do. You can call CRA’s business inquiries line at 1-800-959-5525 and do it in five minutes on the phone. You’ll actually get your GST/HST number on the spot.
Just be ready when you call to tell the agent what kind of business you do, a ballpark idea of how much you expect to bill annually, and how often you would like to file a GST/HST return (we generally advise clients to file annually, for simplicity’s sake).
We have just said that the government doesn’t send you a warning, which is why the onus is on you to register. The more accurate thing to say is that the government doesn’t come after you right away. If they eventually notice that you’re unregistered when you should be registered – and this happens a lot – the consequences can be very expensive.
Learn what to do if you’re late registering for the GST/HST.
Did you know? Personal Tax Advisors will calculate and file your GST or HST return for free.
Read more:
GST/HST Explained in One Sentence
Why You Should Register For The GST/HST (Even If You Don’t Have To)
How to Register for the GST or HST
Avoid this expensive error: Register for HST before CRA asks.
[…] Click here to read Do I Really Have to Get a GST/HST number? […]
Sunny
Is a personal trainer’s fees HST exempt or HST applicable.
Thanks
Personal training is not a tax-exempt service. However, if the personal trainer is self-employed and is a small supplier (billing less than $30,000 per year), he/she could choose not to register for the GST/HST and in that case wouldn’t collect GST/HST on his/her services.
Hello Sunny. LOVE your advice here and some of the replies are close to my situation. 8 years ago I had a small handy man business and did acquire an HST number after registering. I ran for about 5 years just keeping my head above water. However I went back to working full time for the steady paycheck with somebody else. I am currently wanting to go back on my own but with a more focused trade scope small business. Here’s my question. If I start a new small business , will my HST number apply to the new business and I commence invoicing my customers HST or do I need to register again for the new business?
Thanks in advance
Hi Jason, thanks for your question. If you shut down your original GST/HST registration — by which I mean, called CRA and asked to have your account closed — then you would re-register now and get a new number.
If on the other hand instead of closing it you got your account suspended — that is, called CRA and asked to have your account suspended — then you can call CRA and ask to un-suspend it and use it for your new venture.
If you never called CRA and just stopped using the GST/HST number when you got a job, you can just resume using it now. A warning, however: remember that in this case the account is still active, meaning that you must file returns for every filing period, even if you’re doing no business. If you haven’t been doing that, you’ll probably get a notice from CRA at some point. You can file nil returns (all zeroes) for those non-active periods between when you stopped earning money at your first venture, and started your current one.
I’ve been offered a job as an Independent Contractor for a US company. Acting as a sales representative in Canada, for products the US company will sell to the Canadian customers direct. I’ve been told, that I do not need to charge the US company HST, although my salary would be over $30,000 a year. Is this correct? I do not see that it’s exempt on the CRA website.
Hi CT. If you are billing your US customer over $30,000/yr you must register for the GST/HST. However (confusingly) you don’t have to charge a US client GST/HST. Or, more accurately, you charge them 0%.
This may sound pointless, but being registered means you can claim back any GST/HST you spend in the process of earning this income. E.g., GST/HST on gas, some cell phone use, computer purchases. So every time you file a GST/HST return you’ll get a refund 🙂
Why does the CRA website say the limit is $30,000 per quarter?
If you earn more than $30,000 in 12 months, you must register for the GST/HST. A quarter is only 3 months, so if you’ve earned $30k in a quarter of a year, you’ve also earned it within the full year, i.e., 3 months is part of 12 months. The thing about earning $30,000 in a quarter is that it changes the pace at which you are expected to register for your number. Clearly an endeavor that earns $30,000 in 90 days is earning faster than a company that takes 10 months to earn the same amount, so the process is considered more urgent and the timelines are tighter.
What reasons are there to register if you make less than $30K? I’m going to make around $27k, should I still register? Thanks
There are a couple of reasons to register even if you don’t reach the $30,000 (‘small supplier’) threshold. The first is that registration means that you are allowed to claim back from the government any GST/HST you spend on your business. This has an effect on your income tax as well, but the final result is that mathematically speaking you ALWAYS are better off financially if you’re registered for the GST/HST.
Secondly, registering for the GST/HST means you put your GST/HST number on all your invoices — meaning your clients know you’re registered and therefore don’t know how much you bill per year. Anyone who does business in Canada without a GST/HST number is essentially broadcasting to all their clients that they bill less than $30,000 per year — which may be something you want to keep private.
The downside of course is that you have to do a little more paperwork and be careful to set aside any GST/HST you collect so that you have it available when it’s time to remit.
Hai,
I am drive with uber. should I Pay the hst which uber collected from the rider, even if my yearley income is below $30000
GST/HST collected doesn’t belong to you (or Uber). It always belongs to the government. If Uber collects and holds the GST/HST, they should remit it to the government; if they pass it on to you, you should remit it.
Remember, though: If you are collecting and remitting GST/HST, you should also claim back any GST/HST you spend, for example on the business portion of your gas and maintenance costs.
Hi, I worked as an independent contractor for a company in the states until the pandemic hit. I was told I did not have to charge HST to the company as they were not Canadian. Now I have started my own business, based in Canada, and I’m wondering if my income generated from being a contractor to a USA company counts towards the 30k threshold?
Hi Jessica, thanks for your question. Yes, all worldwide self-employment income counts toward the $30,000 threshold. Your other information is correct: once you become registered you still do not charge GST/HST to non-Canadian clients, though you still get to claim back the GST/HST on expenses relating to that work.
Hello,
I primarily work as a registered massage therapist in Ontario, and I collect and remit HST, as I’m over the $30 000 limit. I’m thinking about opening an Etsy shop to sell handmade crafts. Since this is a separate (and very small) business, am I required to charge HST on these items?
Generally yes. Once you are registered to collect GST/HST on any of your self-employment income, you are supposed to collect it on all your self-employment income. By the way, if you’re making Etsy sales outside of Canada, you don’t charge GST/HST on those foreign sales. But you still get to claim back Input Tax Credits (ITCs) for all the GST/HST you spent on your supplies, so that’s an up side!
Did you know that all Personal Tax Advisors tax prep fees for self-employed people include GST/HST calculation and filing at no additional charge? It’s true! Get in touch to set up an appointment or a free phone consultation.
I’m self employed don’t have hst ken I charge hst to my client’s ?
No. You have to have a GST/HST account (in other words, be registered for GST/HST) in order to legally collect this (or any other) tax. If you want to collect GST/HST, or if you’re billing over $30,000 and legally have to collect it, you must first register for the GST/HST by calling the Canada Revenue Agency at 1-800-959-5525.
Hi I’m in just a start up small business so I’m new to this not registering Gst/hst if not making above 30000. My question is when billing an invoice to a company do they need to pay hst? Can company not pay hst. I’m new at this.
If you’re not registered to collect GST/HST, you don’t (and legally can’t) charge it to your clients. Once you register — either because you’ve crossed the $30,000 threshold and have to, or because you choose to — you have to collect it from your clients and start filing GST/HST returns.
Hello,
I am self employed and went over $30,000 limit in June, but didn’t realize I went over till earlier this month (September, 3 months later) and have since registered for a GST account.
Do I owe the CRA 5% GST on any income I’ve made over $30,000, or should I only pay them back 5% on the amount I’ve made since the date I passed the $30,000 threshold?
Would I have to call the CRA, and tell them about my situation and pay via phone?
You did fine, and you really don’t have anything to worry about. Technically they could go back and demand that you collect and remit retroactively. In practice they never do. So long as you registered reasonably quickly after crossing the threshold (you did), they don’t really quibble about exact dates. Just start charging it now, set it aside, and file your return before the due date. Don’t call them, don’t pay extra, and don’t lose sleep.
Hi, I’m starting up a new business but I’m not applying for the gst/hst account because my sales will be under $30,000, does that mean once my sales reach over $30K I have to charge my Canadian customers gst/hst ?
Hi Will. Yes and no. You can’t legally charge GST/HST immediately because you can’t charge it without registering for a GST/HST number. However once you reach the $30k/year threshold you must register and once you’re registered you must start charging GST/HST.
I’m self employed and to date have made 28,000.00 but with my next job in October will be OVER the $30,000.00 mark. So, my question is: since i must now register and start charging my NEXT client the HST, do I also have to pay the government HST on my PREVIOUS invoices BEFORE I reached the $30,000.00 point. Hopefully not.
No, you don’t have to pay the government GST/HST on invoices that preceded your GST/HST registration. In fact, you don’t ‘pay‘ the GST/HST at all; you ‘remit‘ it, which is to say you hand over amounts you collected on the government’s behalf. You didn’t have the legal right to collect GST/HST before you registered, and so there’s no collected GST/HST to remit for those invoices you issued before you crossed the $30,000 threshold and registered for the GST/HST.
in 2018, many winters I am not working very much and SO, i may NOT reach $30,000.00 in sales in 2018. But if I have already recently registered in 2017 (reached $30,000.00 in late September), why (and how would I know) if I needed to charge my clients HST. Seems complicated somehow. Can you help explain.
Once you register, you have to charge/file/remit GST/HST. So even though you won’t hit the $30,000 in 2018, if you’re registered you’ll still have to go through the motions. However, once you’ve been registered for a year, if you’re fairly certain you’re not going to reach that $30k threshhold for the foreseeable future, you can call CRA to either cancel or suspend your GST/HST registration. Once registration is cancelled (or during the period during which it is suspended) you neither collect, file, nor remit GST/HST.
Hi there. I am employed full-time but do freelance work on the side. I am about to break $30,000 in freelance, but ALL my clients are US-based. Because all revenue is OUTSIDE Canada, I do not charge HST. Do I still need to register for an HST number? I thought I did regardless of client location because CRA’s website did not mention that, but this article makes me believe otherwise. Any clarity would be much appreciated! Thanks!
The bad news is, yes, you do have to register for the GST/HST. The good news is, you’re probably going to end up getting refunds (free money!).
You have to register, because all your worldwide business income counts toward the $30,000 limit even though you will never charge a dollar of GST/HST to your US-based clients. Even once you register, you do not charge HST to non-Canadian payers. (Technically you do charge American payers GST/HST, but you charge it at 0% — there’s a legal difference between ‘not charging’ and ‘charging 0%’, but that’s a topic for another day. From your perspective, it’s all the same.)
But here’s where it gets fun: when it’s time to file your GST/HST return, you remit to the government all the GST/HST you collected — which in your case is $0 — and you claim back all the GST/HST you spent on your business. Depending on what your business is, if your expenses are made in Canada and there are a lot of them, you could be entitled to a tidy sum.
So don’t despair! Register, because you have to. File returns, because it’s the law. And then enjoy that sweet, sweet, refund because you can 🙂
Hi there,
If a person works on work permit and his income is more than 30k, does he need to get GST number?
Everything depends on whether you’re considered to be an employee or self-employed. If the employer is withholding tax and issuing a T4 (rather than T4A) slip, you’re an employee and that income doesn’t trigger the need to register for the GST/HST. However if the payer is not withholding tax and either just makes payments with no slips, or issues a T4A (rather than a T4), that is self-employment income and counts toward the $30,000 limit that may require GST/HST registration.
So I do have a question that hasn’t maybe been answered yet. What if someone made income since March in their personal name (basically sub-contractor) and went over the $30,000 threshold and is now as of Sept 20 starting to charge customers in a new business name. How do you deal with that as his GST number he should get because he went over in his personal name now will belong to his business name?
Thanks for your help
Hi Jack, the business name change itself is irrelevant, so long as the person is a sole proprietor, that is, if they have not incorporated. A sole proprietor is essentially considered to be one with the business, so even if they change their name, or spend part of their time subcontracting for someone else and the rest of the time billing clients directly, it’s all considered one business and all the income contributes to the $30,000 limit.
Hi Sunny, I’m so happy to have come across your post. It has so much useful information! From what I understand, filing a return is the general process of giving the gov’t the HST that I earned, while claiming back the HST that I spent on my job. Can you confirm this please? Also, does the gov’t send you a check of the HST I spent on my business automatically, or do I have to ask for it from them, claiming the amount of expenses I paid for my business? Thank you!
Hi Marc, glad you find the information useful! When you are registered for the GST/HST, you have to file GST/HST returns, which are a formalized calculation showing how much GST/HST you collected in the period and how much you spent. You remit the difference to the government.
For example, say you billed $1000 in GST/HST in the period, while spending $400 in GST/HST in the same period. You would remit only $600.
The only situation in which you would get a refund cheque is if you collect less than you spend — either because you’re operating at a business loss (i.e., income is less than expenditures) or because your payers don’t pay GST/HST (e.g., your customers are in the US, while your expenditures are here in Canada).
Hi, I recently started working in October in a new career field.
I have been working in a clinic since last month, but am also going to work through my own private practice next month (sole-proprietorship) . Both count as freelance work, and I am not yet making $30K gross.
I expect to hit the $30,000 threshold within 12 months. I don’t know how soon I will hit that mark, but should I already register for HST now?
Because my income will come from two separate sources, would I eventually need 2 HST numbers? Or is all my income counted via 1 HST number?
Regarding my private practice: So that my clients aren’t shocked by a sudden price increase, can I already start charging HST to my clients from the get-go, in preparation for when I do have to submit the HST amount?
Thank you for your time.
Hi Bernardo. It’s fine to register for the GST/HST early rather than worry about it later. And since you can’t charge GST/HST to your clients without being registered, I’d say you’d better register right away so you can start charging as soon as you’re in your private practice. You don’t mention what kind of services you’ll be offering, but be aware that that medical services are exempt from GST/HST. If you only offer non-taxable services, you can’t register for the GST/HST.
I currently live in Ontario and work from home. My clients are in quebec. So I only collect %5 gst/hst from them. Now when I file my taxes technically I only have to pay back to the gevernment the %5 hst/gst I collected from my quebec clients correct? Or do I have to pay the government %13 hst since I live in Ontario?
You remit only what you collect. In the case of your Quebec clients, that’s 5%.
Bottom line: GST/HST registration should never cost you money in the end 🙂
Hi Sunny, I am a self employed massage therapist. I was advised by work t[ where I work on contract] to register for the HST as I would be earning more than $30,000 a year. I have been remitting now for three quarters but I have not yet reached $30,000 in any 12 month period. Is there any way I can get a refund on the Thousands I have remitted to the government?
Before starting to remit, I had a gst number and missed filing in 2016. Even though I was not earning enough, will the government be looking for the revenue from me for that time period as I had a HST number at that time?
Hi Thomas, I need a little more information in order to answer your specific questions, so my assistant will be in touch to set up a phone conversation.
The very short, general answer is that you should never be ‘out of pocket’ to remit HST. Remember that you bill HST on top of your fee, so it’s an additional amount of money that then gets passed on. Then you claim back any HST you spent on your business expenses.
As for the older number, you’d need to check in with CRA to see if they’re still waiting for anything regarding that account. Remember also that it doesn’t matter how much you earn once you’ve registered; if you’re registered for the HST during a certain period, you are obligated to charge HST on all your business fees, and remit that HST to the government.
You may be fine, though; it depends on your specific situation. Hopefully we’ll get a chance to talk in person and figure everything out 🙂
Hi we are looking to buy a commercial property do we have to pay HST?
So for example on a $500k property are we required to pay 13% = $65k
The commercial property is made up of store front 30% and with three separate residential apartments. 70%
One or two of the apartments are occupied by students. Are student rental in general considered as part of commercial and do I have to start charging the tenants GST/HST?
Question
Would the HST only apply to the store front?
Also when will we receive all the HST back? How soon as this is alot of money.
What steps do you recommend we initially take we are thinking of incorporating.
1/ Incorporate first
2/ Then Apply for GST account under the incorporation name.
Hi Tony,
In terms of purchasing a building for investment purposes, there are a number of special rules around GST/HST that I don’t feel qualified to advise you on. You should definitely engage a lawyer, tax specialist, or both before making a major investment like this.
However, here is the information I can provide, starting with your last question first: yes, you have to incorporate first. This is because an entity can’t register for the GST/HST if it doesn’t legally exist yet!
If the seller is charging you GST/HST, you definitely want to register for the GST/HST before making the purchase, otherwise you won’t be entitled to claim any of the GST/HST back.
After making the purchase you would file a GST/HST return to claim back the GST/HST you spent. How soon you get it back depends on a) how frequently you file; b) when exactly you file; c) how fast CRA processes your return; and d) whether CRA requests further documentation from you before releasing the refund. There are too many variables here for me to give you a useful estimate, sorry.
As for rent, commercial rent is subject to GST/HST but residential rent is exempt. So the commercial tenant pays GST/HST — which you will later remit to the government — while the residential renters don’t (nor are you responsible for remitting GST/HST on the residential rent).
Hope that helps.
Hi there,
I have been operating a home based office business for 1 year (far below the $30,000. mark and financed a vehicle in June.
If I register my business, can I write off any of my vehicle as it is used to travel from client to client.
It is really the only expense I have to claim back as I already had the computer and office supplies are supplied by my clients.
Only other expense I guess would be my cell phone and the internet.
Please advise.
Thanks
Hi Sharon,
You can always write off a portion of your car expenses for business, even if you don’t register a business name or register for GST/HST. Just remember to keep a log of business vs personal kms driven, then use that ratio to prorate the operating costs and depreciation* of your car. For example, if you use your car 15% for business, you claim back 10% of the cost of gas, repairs, insurance and (a limited amount of) interest on your car loan etc.
However, if you want to claim back some GST/HST on the cost of the car then of course you must register.
Be aware that while claiming back the GST/HST on the operating costs of the car is fairly simple — in most cases you take the percentage of business car use and multiply it by the amount of GST/HST spent on those operating expenses — claiming GST/HST back on the purchase of the car itself is a bit complex. Rather than explain it here, I’ll write a blog post about it at a later date and post a link here.
[The short form for the tax geeks reading this: each year you get to claim back an estimate of the GST/HST remaining in your undeducted capital cost (UCC) of the car based on the percentage of business use of the car; that amount also gets deducted from your closing UCC.]
Hope that makes sense!
* Depreciation isn’t quite the most accurate term, but it’s the one non-tax-folk tend to use. The actual term is amortization.
Hi there, have a small business in trucking. Just hit my 12 month mark with 41.000 for the year and still have yet to register a GST number which I will be doing today actually. Will I get back charged for the 11.000$ ? I have about 35,000$ of expenses and will I be able to backdate my GST number to be able to claim my expenses?
Hi Vick,
Congratulations on the growth of your business!
Yes, you’ll have to back-register for the GST/HST, and then you’ll have to treat the last $11,000 as if you were registered for the GST/HST. Then, one option is that you can go back to your payer and re-invoice them with HST added (sometimes a payer is willing to pay the HST retroactively, provided they haven’t closed their books for the prior year. This is most likely possible before the end of March, as many businesses close their books as of March 31).
The other option is to treat the $11,000 as if it already includes GST/HST. In other words, you can split it into a fee plus GST/HST that totals $11,000. For example, if you’re in BC you would treat the $11,000 as $10,476 plus 5% GST, which totals about $11,000. The $10,476 becomes income for your income tax return, while the $524 in HST must be reported on your first GST return and remitted to the government.
As an owner/operator courier i get paid buy my supplier every 2 week ,,I don’t collect any $ but I claim gas maintenance meals,,,,do I still need to register
You need to register for the GST/HST if you bill more than $30,000 in a 12-month period. You can write off business expenses such as gas, maintenance and meals without being registered for the GST/HST.
Not sure what business expenses you can deduct? Click here to receive a free copy of our Guide to Business Deductions.
Hello Sunny, I just came across your post today and thank you for all your information which I have found very useful.
I started working for a company 14 months ago and they have been paying me $780 HST on top of the $6000 monthly pay (as an independent contractor consultant). They are now just asking me for an HST number which I never registered for last year. What is the best course of action? I am planning to call CRA and get an HST number directly under my name.
Thank you for any information you provide
Hi Michael,
Yes, the best course of action is to register for the HST by calling CRA, and it’s fine to register under your own name. However, you will have to request that they back-date the registration to whenever it was that you first started ‘collecting’ HST (that is, when your employer started paying it to you). I’m crossing my fingers that you set aside all the HST you were paid, because after you register you’ll have to file a GST/HST return covering the period from the date of registration to December 31, 2017 and remit all the HST you collected, minus any HST you’re claiming back on expenses.
Hi, so a recent sales tax law mandates Uber drivers that service in Ontario and Alberta to register a HST/GST account no matter how much income they earn, and here’s my question:
If a person has two self-employed businesses, Uber being one and the other wasn’t required to register a HST account prior years, how will this affect the person’s personal tax return? Will the person have to file HST for his other self-employed business as well?
Another question is, I’ve seen people earn over $30,000 professional income (doctors for example), they claim all their expenses on T2125 and they were not required to file a HST return. I can’t find any info on CRA and just wondering why? Do medical practitioners get an exemption?
Thanks!
Unfortunately yes, you will have to charge GST/HST on your second business (assuming that business is not offering a tax-exempt good or service) because your Uber business is registered to collect GST/HST. Doctors don’t have to register because medical services are exempt from GST/HST.
Hello Sunny,
Thank you for the detailed and insightful post!
I was curious, if lets say you’re based in Canada and you reach the $30,000 mark, But $29,000 (digital downloads) came from USA customers, do you still need to register for HST/GST?
Hi David, thanks for the kind words!
In short: yes, you do have to register for the GST/HST, even though most of your sales came from the US.
Any business operating in Canada with sales revenue in excess of $30,000 from anywhere in the world must register for the GST/HST. However, be aware that even once you’re registered, you still don’t charge non-Canadian customers GST/HST.
What’s the point of registering for the GST/HST if you’re not charging it? From CRA’s point of view, who can say? They’re odd over there.
However, there is an important advantage to you. Because the GST/HST system requires you to remit any GST/HST you collect (i.e., $0, from your US customers), it also allows you to claim back and GST/HST you spend (i.e., on supplies, office expenses, vendor invoices). Yes, that means a refund my friend!
if you have a HST # can you collect unemployment insurance.
Hi Paul. Any income on which you have paid Employment Insurance (EI) premiums can trigger EI earnings, regardless of your GST/HST registration status. The only income that is automatically considered insurable (without a special agreement) is employment income. This means a salaried income where you’re considered an employee and not a vendor. In this case, the EI premiums are automatically deducted from your paycheque.
However, usually you register for GST/HST because you are self-employed, at least partially. Self-employment income is not automatically considered insurable under EI, unless you have additionally entered into a special agreement with Service Canada to start paying premiums and filing Schedule 13 with your income tax return.
Hi, My adult son already had registered for HST, and now what? What form are we supposed to use to report HST? How do we pay HST to CRA?
Hi Sally. CRA will send you a (blank) return and a request to file at the end of each filing period (which is quarterly or annually, depending on how your son set things up with them). Filing the return also serves as your calculation as to how much you must remit. You can remit by enclosing a cheque with the remittance voucher or through your bank. Some instructions may be included with the Notice of Assessment (NOA) that you receive after you file your return, or you can call CRA’s business information line to learn more. You can reach CRA’s business and HST services at 1-800-959-5525 (press the * key to speak to an agent). If you get a busy signal, just keep calling until you get through.
Hey I operate a business performing physiotherapy and rehab and functional assessments is this considered medical or do I need to register for a number ? Thanks
Hi Candace. Each province determines what services are considered medical and what services are not. Here is a list that you can check to see whether your services qualify:
https://www.canada.ca/en/revenue-agency/services/tax/individuals/topics/about-your-tax-return/tax-return/completing-a-tax-return/deductions-credits-expenses/lines-330-331-eligible-medical-expenses-you-claim-on-your-tax-return/authorized-medical-practitioners-purposes-medical-expense-tax-credit.html
If your services are considered medical, you don’t have to register for or collect GST/HST. However, different rules may apply if you offer some services that are medical and others that are not.
Hi, I recently started working for my cousin and his construction job. He told me that I need to get a gst number because he isn’t deducting it from my pay. I can guarantee I won’t be making $30000 because it’s only a summer and possibly a casual job. I looked at the revenue Canada page but I couldn’t see anything about employees.
Hi Cristel, thanks for your comment. Employees (i.e., people who work for a regular salary) don’t register for GST/HST; only business owners do. The key here is to determine if you are an employee or a business owner. If you’re self-employed and are billing your boss rather than being paid an hourly salary and receiving a T4 slip, then you’re a business owner. You don’t have to register or collect GST/HST unless or until you register for a number. The payer (your boss) doesn’t ‘withhold’ GST/HST. Your boss pays it to the business owner (you, if you’re registered and have a number) and the business owner (again, you) is responsible for remitting it back to the government. Sign up for our Two-minute Tax Tips to receive our free guide to GST/HST.
Hi, I incorrectly applied for a get number.I thought I was suppose to but I won’t be making anymore than $1000.00 or less a month. How do I go about cancelling the number
If you registered less than 90 days ago, you can just call them and say you registered in error and basically delete your account.
However if it’s been more than 90 days you’ll just have to hang in there and continue to be registered — along with all the charging-and-filing obligations that entails — for one year. After one full year of registration you can call CRA and request to cancel your registration.
Hi,
I am a licensed real estate agent and also have my own business (sole proprietor) offering staging services. My gross income combined is still under 30,000 however I am forced to have an HST number because my brokerage charges HST which is included in the commission I am paid. CRA said I needed the one HST number for both businesses so I charge HST for staging and I claim ITC’s. When filing my GST/HST, I treat it all as one business (combine the incomes and expenses) especially since they are so closely related. Now I’m trying to do my own taxes but it seems I have to fill out 2 separate T2125 forms (one for real estate and one for staging), is that correct?? I have kept track of expenses combined! I earned more with real estate but the vast majority of expenses (and ITCs) were from staging. Can I not treat both income sources as one business when doing taxes? SHOULD I have 2 HST numbers? Can I stop charging HST on staging services since Im under the threshold? It was an advantage because I had so many ITCs from staging purchases (inventory) to lower the tax owed on real estate deals. Advice?
Hi Lia, you don’t really have to complete two T2125 schedules. If the software is forcing your income into two different places and you can’t figure out how to get it all to show up on a single form, go ahead and dump all the expenses onto one or the other schedule. There’s no mathematical difference because all self-employment gross and net income is combined when your taxes are calculated. Moreover, the only data regarding your self-employment income that CRA receives when you efile your return is the net profit/(loss) from all your self-employment so they won’t even see how many T2125 forms there are unless they show up at your door and ask to see them (highly unlikely!).
As for your question about charging GST/HST on your staging business, you must charge it. Once you’re registered to collect GST/HST, you must collect it on all self-employment income regardless (one other way all your self-employed endeavors are treated as a single thing).
Hi Sunny,
Great article, especially for novice entrepreneurs!
I found myself in a difficult situation. I have a permanent job and also run a small business. I never reached a 30K threshold and don’t have an HST account. I was going to merge my business with another person’s company after which my revenue was supposed to cross 30K and I was ready to register for HST. In this anticipation, two weeks ago, I charged my client the HST on a small repair job. You know – one can start charging the HST before registering the actual account, up to 30 days in advance. Unfortunately, after that, things went absolutely wrong with my business partner-to-be. As a result, I am not going to expand my business anymore, my revenue will remain under 30K so I don’t need the HST registration. What do I do with that HST amount ($23) I charged the client? Open the HST account, remit the money and close the account?
Don’t open the GST/HST account. Treat the $23 as part of your business income and report it on your income tax return. It’s fine unless the customer is also GST/HST registered, in which case you might have to revise the invoice so they don’t try to claim back the $23 as an input tax credit (when it really isn’t one).
I didn’t see this question as having been asked, but forgive me if you already covered it. When first applying for a GST registration number, voluntarily, can a supplier (independent contractor) request an earlier effective date? As in a few years earlier? Thus allowing the supplier to retroactively invoice a client for uncharged GST.
heres my situation i took a job as a subcontractor or a daily rate . i never made over 30000 thousand per year but was responsable for my own tools , transportation all expenses nothing was told to me that i should have been chargin gst or hst, now when tax time came i wasa issued a t4a slip and essentiallly lost money on my 1st year painting company . i havent done my taxes as my t4a was issued months late after a fallling out what to do
You don’t need to have a GST-HST registration in order to write off business expenses, and if you billed under $30,000 and were a painter you don’t need to register for the GST-HST. Declare the income from the T4A, and then go ahead and write off (deduct) the expenses related to your business. Both the income and the expenses should be entered on form T2125 Statement of Business and Professional Activities as part of your income tax return. The business loss will reduce your taxes or increase your refund. If the business was the only source of income for that year, the business loss can be carried forward and used to reduce taxes in a future year.
Not sure how to complete form T2125 Statement of Business and Professional Activites? It may be time to hire some help. Contact Personal Tax Advisors for more information on what we can do for you or to book a free phone consultation.
I have been operating a partnership for 4 years that derives 100% of its income from an Asian country. I did some research back then and came to the conclusion that I did not have to charge GST/HST. I see now that I should have registered even if I did not have to collect the HST. How is Revenue Canada likely to react to this when I inform them?
It shouldn’t be a problem. The Canada Revenue Agency (CRA) will probably want to register you retroactively if they know you have been over the small supplier threshold ($30,000 in a 12-month period) and that will obligate you to file returns for the periods between your registration date and now. However, these returns are most likely to result in a refund for you, since the GST/HST you collected is $0 and you may have spent GST/HST on business expenses that you are now entitled to get back.
What if I registered for GST-HST number and have expenses but 0 income? Do I just file a nil-return or can I get a refund?
You can get a refund. In fact, you’ll get a refund in any year where you spend more GST/HST than you collect. But be aware: while you can file a GST/HST return and get a refund, doing it for several years in a row may trigger scrutiny from the Canada Revenue Agency (CRA). This is because most GST/HST refunds occur if you spend more than you bill, i.e., you’re running at a loss. Business losses aren’t a problem per se. However if they go on year after year CRA may ask you to answer a few questions regarding your business intentions.
So, this past year I made 40k – and haven’t gotten a gst number (I know I am horrible). What happens to my taxes? Can I call and get the date changed to retroactive before I made my commission (started making money in May – July 2019)? Am I not allowed to get the gst back in my expenses?
Yes, you can register retroactively! You would probably back date not to May, but to the date on which you crossed the $30,000 mark, which was probably a little later. And then you get to claim back any GST/HST on expenses that you paid out after that registration date.
Hi there,
I’m in the same situation as Julia only its now 2021. I hit the 30K threshold in Nov 2020 but haven’t registered. So if I register retroactively, should I ask my client to retroactively pay me the GST I should have charged them starting in Nov?
Unless you earned all $30k in a single calendar quarter, you weren’t obliged to register for the GST/HST until January 2021 (the first month after the end of the quarter in which you crossed over). So you could register retroactively to Jan 1, 2021 and back-charge only from that date forward.
On the other hand, if you did earn all $30k in a single quarter (e.g. between October and December), you became obliged to register and charge GST/HST as soon as you made the sale that pushed you over $30k and would have to back-charge it to that date.
Hey there. What if I am a musican who normally doesnt make over 30k, but last year I did, but thanks to streaming and covid I now stand zero chance of making even half of that next year….do I need to register for a GST number for this one year?
Technically, yes, you need to register. And according to the rules, you need to stay registered for at least one year. But this may not be as big a problem as you might expect. Let’s take the consequences one year at a time.
For 2019, you would owe to the government any GST/HST you should have collected on your self-employed income after you hit the $30k mark. Remember that even if you have crossed the threshold and have to collect GST/HST, there are a lot of forms of income that don’t actually collect GST/HST, for example music lessons, sales to US or other non-Canadian entities, and SOCAN royalties. So yes, you should have collected, but the actual amount may not be gigantic unless you were gigging like mad and all the gigs were in Canada.
For 2020, the terrible year: you collect GST/HST on any fees you charge to a Canadian person or entity, except for music lessons. You hold onto that GST/HST, which you hold in trust for the government. Next year when you file your GST/HST return, you’ll remit that GST/HST, minus any amounts of GST/HST you spent on your business. No gigs? No GST/HST to collect, nothing to remit. You can file a nil return (all zeroes) or you could even file with $0 GST/HST collected (if that’s the way it is) and still claim back GST/HST on your expenses. You actually get a refund.
I don’t know your exact situation, so I can’t be more specific than that. If you’re interested in discussing further, you can just set up a phone call with me and we’ll discuss your specific situation. There’s no charge for this, so don’t hesitate to get in touch.
I am a real estate agent. If I make over 30,000 do I have to pay HST on it over and above the HST charged on the sale of the house. SO on top of the HST now I have to pay an additional 3,900? Is this correct? If so what is the benefit of making over 30,000. For example if I make 34,000 I would have to pay 4,420. That would be more than if I kept it at 30,000. Ideally it would only be good to make over 30,000 if it is substantially over 30,000 and not just a few thousand?
Hi Lizzy. You don’t pay the $3,900. You collect it from someone else, then remit it to Canada Revenue Agency (CRA). Once you hit the $30,000 threshold, you register, inform whoever pays you, and from that point forward they must pay you your commission PLUS GST/HST. You hold onto that GST/HST you collected for the time being.
Meanwhile, you have business expenses, and your agency is probably also charging you fees, all of which which have always also included GST/HST. Now you get to claim that back.
So you may collect $3,900, but claim back $1,000 in GST/HST on expenses. You remit $2,900 and use the extra $1000 to enjoy your life. That’s the advantage!
Hi Sunny,
Thank you very much for writing this article.
I’m in the process of filing my 2019 taxes. I have always been a permanent, full-time employee but last year while between jobs during Feb – July 2019, I took a marketing consulting job for 4 months. Because of my lack of experience in contract work, I had no clue about having to register for GST/HST or that I had to collect GST from my client. I only did 4 months worth of work but I was about $17K over the annual small supplier threshold. Now I’m doing my taxes and I’m freaking out a bit. I’m not sure what I need to do since I have never collected any GST from that one client and stopped doing freelance work.
Any advice would be appreciated. Thank you!
Sorry…forgot to ask, could I just not register since I won’t be doing any more freelance work and just not claim the GST for any of my business expenses?
Thank you!
Hi Mitra. The most correct thing to do is to back-register for the GST/HST (your date of registration should be the day on which you billed the first dollar over $30k), then go back to the company that was paying you consulting fees and bill them retroactively for the GST/HST, amounts you will then remit to the government.
Another way to handle it is to back-register, leave the payer out of it, but recalculate all your invoices to break them down to an amount for your fee plus GST/HST, totalling whatever you billed. For example, if you billed $100 and now you are responsible for collecting 5% GST, you would revise your records to show an invoice of $95.24 + 4.76 GST. When you file your GST/HST return, you would have to remit the $4.76. If you’ve already filed your personal income tax return, you might also want to adjust it (lower your gross consulting income accordingly), which will reduce income tax.
Given that this was a one-off, I know there’s a strong urge to just let it lie. I can’t really recommend this, as it is not correct. CRA can and sometimes does review self-employment income exceeding $30k, and force people to back-register — sometimes years later. If you want to discuss your options, maybe we can set up a call. Visit the contact page and let them know you want to book a chat with me and we’ll talk.
Hi Sunny! what a really great page I landed on. I just have a couple questions.
I have a full time office job making full salary, but over the last couple years I have registered myself as a sole proprietor for my own photography business with GST number and collect GST because my self employed income is over $30k.
I am in the process of starting a new business partnership with my partner selling retail goods, and we will be incorporating this line of business partnership. If we don’t anticipate making $30k this year even though we are incorporated, is it mandatory to make a GST number or is sole proprietor and corporations follow the same guidelines?
Secondly, because I made over $30k with my photography business as a self employed income, when i report my partnership revenue – does that automatically make me over the threshold? or do I treat it separately because they are different legal entities? So if it is separate, that means that the $30k threshold for our retail business should only be income from the jewellery and not the photography.
Because we are selling product goods, do we have to register for PST as well? does it follow the same process? is there a threshold for that?
From reading through the comments above, if we sold to the US, we would not be charging tax but report as $0 back to CRA, in addition would we need to register with the US government at all since I am making sales in the US – and will we need to incorporate in the US as well with a business license number in order to sell in the US online say through etsy?
sorry so many questions! thank you in advance 🙂
Hi Juliette. Don’t apologize; these are great questions!
First, regarding your question about registering for the GST/HST on your corporation. Yes, small supplier rules (i.e., the fact that you are not obliged to register for the GST/HST until/unless your revenue exceeds $30,000 in 12 months) are the same for a sole proprietor and a corporation. And since the corporation is separate from you as a sole proprietor, you can and must manage the two potential accounts separately.
Second, regarding whether your sole proprietor income must be taken into account when determining your corporation’s status, the answer is no. Your sole proprietorship is considered to be part of you as a human being. That’s why the profit from your business is reported as part of your personal income tax return. Your corporation, by contrast, is legally a separate person from you. All revenue, funds, expenses, registrations and tax filings for the corporation are completely separate from your personal revenue, funds, expenses, registrations and tax filings.
Regarding your PST question: If you are selling goods, your PST obligations depend on the province(s) in which you will be making sales. In any participating province (that is, a province charging HST instead of GST), there is no separate PST to register for. In some non-participating provinces and territories (e.g., Alberta), there is no PST. The rest of the provinces (non-participating, and having a PST) each have their own rules. Do your research with each province’s Ministry of Finance to determine your obligations.
Finally, as for US sales, I can tell you that you won’t have to collect GST/HST, regardless of whether you’re registered. However, if you (and/or your corporation) is resident in Canada, you will have to report ALL world income on your Canadian return. I don’t think you need to also incorporate in the US, but I’m not a US tax specialist. Check in with the IRS rules.
Best of luck with your new business ventures!
Hello,
I worked for the last five months as a cleaner(sub-contractor) and quit the job. Now, I start working as a delivery. I expect my income yearly not exceed 30.000. Should I get a business number or not necessary?
Hi Adnan. You don’t need a business number until you reach $30,000 in income in a 12-month period. And even if you DID think you were going to earn more than $30,000, you don’t have to anticipate (i.e., register before) reaching that point. You can register right after you reach the threshold.
Hi, I have just started freelancing web development work. I don’t expect to make over 30000 for this year but I am wondering if it is worth registering for HST number anyway because of expenses? I just bought a $3000 laptop and have other software expenses. Any advice would be appreciated, thank you!
Hi Rosalyn. As a small supplier who is not obligated to register, you have to decide whether it’s worth it to you based on the pros and cons.
The pros are the GST/HST you will be able to claim back on your assets and expenses; and also the privacy advantage of not revealing your small supplier status to clients and customers. Learn more about using your GST/HST registration to conceal your status here.
On the Con side of things, there is the added layer of administrative work: charging GST/HST, collecting and setting it aside, filing timely returns with CRA, and remitting the collected tax net of ITCs. Remember that you will have to continue collecting/filing/remitting GST/HST for as long as you remain registered, regardless of how much or how little revenue you earn.
In the case of your laptop purchase, you’re looking at claiming back $345 or more in GST/HST (depending on where you live and how much HST your province charges) on that purchase alone. Of course you’re unlikely to purchase a $3000 computer each year, while your obligations as a registrant go on indefinitely. So it’s your call as to whether the trade-off is worth it.
A real quick question. How do you figure out a 12 month period after 30k threshold is passed? Is it from the date i started my business(providing nail services in July) or I can choose from Jan to December as my annual income? Thank you for your time.
Hi Kelly. You don’t have to figure out a 12-month period after you reach 30k. You’re trying to figure out whether you billed 30k in the past 12 months, regardless of what month you’re in right now. For example, I’m writing this in July. In order to see if I have to register for the GST/HST, I need to check my revenue from last August to today and see if it exceeds 30k.
It appears you may be confusing that threshold rule with your fiscal year (the 12-month cycle you use to do your accounting and filing). While in some cases it is possible to select your fiscal period, by default when you register for GST/HST CRA will set your fiscal year to be January 1 – December 31. (By the way, I don’t recommend you choose an alternate fiscal period unless you have a very good reason. It can get very confusing, especially if you’re a one-person operation.)
If I were to register for the GST/HST effective August 1, my general filing period / fiscal year would still be January 1 – December 31. However in this, my first year, my very first filing period would cover August 1 – December 31. From then on it would be a regular calendar year.
Good Afternoon,
| am looking into a job doing small parcel deliveries. I will be paid weekly and no taxes will be taken off. I will be using a rental vehicle and my own gas. Questions: Since there will be no collection or exchange of money while making deliveries do I still have to put away 15 % of my income for GST? Second – How much of the rental and gas can I right off at tax time?
Hi Stephanie. Unless you, personally, are registered to collect GST/HST, you do not have to remit any GST/HST to the government. The universal truth is: if you don’t have to collect it, you don’t have to remit it.
However, that doesn’t mean you won’t pay income tax on this income. Depending on how much of your pay gets eaten up by deductible expenses, the amount to set aside for income tax can vary. Hopefully you have some idea of how much of your pay you will actually get to keep after expenses (if not, figure it out, because you need to know how much you’re actually being paid!). If you know how much your profit (pay minus expenses) is going to be, set aside about 31% of it for tax.
If you don’t know how much your expenses are going to be, try setting aside 25% of your gross pay for now. With luck you’ll have set aside more than you need for tax, and you can keep the extra for yourself 🙂
You can write off any rental or gas you pay for in order to do deliveries. If the rental vehicle is used only for business (deliveries), that should be an easy calculation – just add up all your receipts. On the other hand, if you use the rental vehicle for a combination of business and personal use, you’ll have to take a percentage of rental and gas, based on what percentage of the vehicle use was for business.
I have a freelance arrangement to do paperwork for an insurance agent (no ‘licensed’ type of work required). No expenses – just typing and sending out documents. Payment would fluctuate from month to month but most likely would be over $30K annual. Do I really need to register & charge gst for just paperwork?
Hi Gail. Unfortunately yes, you do. The nature of the work you do isn’t important. What matters is that you’re a self-employed person billing more than $30,000 in a year. The good news is, you don’t have to register until you actually bill $30,000, so if you haven’t reached that threshold yet you can wait. Once you do bill $30,000, however, don’t put off registering! CRA reviews your personal income tax return, and if they discover you’ve started billing over the threshold but haven’t registered, they can back-register you and send you a hefty bill.
Hi Sonny,
Im working and at the same time making jewelries on my leisure time and sell on Etsy and other people. I only registered my business name but not with gst/HST or with the city. Anyways my business will be under 30k. Do I need to register with them? The other thing do I need to register for import and export as I do buy some stuff overseas
Hi Hope. If your business income is under $30,000/year you are considered a small supplier and you don’t have to register for GST/HST. As for registering for import and export, that is also not necessary, as far as I know. However I am not an import/export expert! You can learn more about Import-Export accounts from CRA here.
Hi there, I’m quite new to all of this but have seen it mentioned many times that new legislation went in a couple years ago requiring ALL Uber drivers to register for a GST/HST account with the CRA. I’m hoping to get clarity on whether or not that only pertains to Ride-Sharing partners as I am only particpating in UberEats and not using a vehicle.
I have a full time (salary) job and have just started doing UberEats deliveries on the side (either walking or biking- will never be with a car). I will not come close to the $30,000 threshold doing UberEats.
Do I have to register for a GST/HST account or am I ok to just file like normal (T4 from my full time job) + T2125 now that I have this independent contractor work (UberEats) as well?
Thank you very much.
Hi Matt. Because as an UberEats delivery person you do not collect GST/HST from the customers, you do not automatically have to register for the GST/HST (unlike Uber ride-sharing drivers, who must collect GST/HST from customers). The exception would be if you earned more than $30,000/year in self-employment, which you say you are far from doing. So far so good. Be aware, however, that if you start doing other work as a self-employed person, that income must be combined with the UberEats income to determine whether or not you reach the $30,000 threshold. If all your self-employment income combined comes to less than $30,000 per 12-month period, you do not have to register for the GST/HST.
Hello,
Wow!! First may I say how pleasantly surprised on how diligent you have been in responding to everyone’s questions! This is amazing! Keep up the amazing work, it will get you far! Now, here is my situation:
I work as a “self contractor” for a company ( at least this is what it is written on the contract). Now, the contract itself makes me question whether i’m truly an employee vs self-employed as I cannot hire anyone else to do the job, I work fixed hours for the company but I am responsible for all my expenses to perform the job. The company has provided me with the required laptop and headset to perform the job in question. I understand based on CRA that this makes a difference on whether I truly am self employed or not. Which brings me to the next step, I am now 8 months into the job and likely to earn above the 30K threshold before the 12 month-mark. Now, I will need to register for HST but if i am NOT self-employed after all then what happens? I’m receiving a fixed hourly salary for fixed number of hours worked per day thus my income is almost the same on the monthly basis with no chances for “loss” and really I would not call it self-employed. What do you think? I have no opportunity to charge HST back as I only have 1 company that I work for. I’m also working full-time elsewhere for an employer with a regular income, and already pay hefty income tax yearly of > 6K and now have now received notice to pay installment tax starting Sept for a hefty $4500 for the next 2 quarters.
Thanks for the kind words! To your comment: there are two major questions here, which I’ll address one by one.
The first is the question of whether you need to register for the GST/HST, which is really a question about whether or not you’re considered to be self-employed. If you’re not self-employed, i.e., if you’re considered to be an employee, you don’t have to register regardless of your income. Obviously the situation you’re describing does point fairly strongly toward you being an employee from CRA’s perspective. But at this moment, it’s the payer (your employer or client, depending on how they see themselves) who determines whether you’re self-employed or not by the way that they handle your pay. If you have to issue invoices and/or they’re issuing a T4A (self-employed) slip rather than a T4 (employee) slip, then you’re self-employed. (Slips aren’t issued until early the next year, but suffice it to say that if they’re withholding tax, EI and/or CPP, you’re going to get a T4; otherwise, you’ll get a T4A or nothing.)
So at this moment, it is the payer who determines how you’ll have to proceed. That said, there can be a conflict between how the payer sees you (e.g., as a self-employed contractor) and how CRA thinks you should be seen (e.g., as an employee). If it is brought to their attention that a payer is treating you like a self-employed person when CRA thinks you should be an employee, they’ll come after the payer and demand that new T4 slips be issued, taxes be remitted, etc. etc. after the fact. Until that happens, you go with whatever the payer is doing.
And if you are considered to be self-employed and have to register for the GST/HST, then you will charge your payer/employer that GST/HST at the appropriate rate based on the payer’s location, and they have to pay it to you. There are no exceptions to this.
Second issue: instalments. Rather than explain it all here, I recommend you take a look at my post about tax instalments, what triggers them and what it all means. One point I’d add to that blog post: If you want to not owe tax/instalments and you have a salaried job, have your employer withhold more tax. Take the amount of your last full-year tax bill, divide by the number of pay periods in a year, and ask your employer to withhold that much extra tax each pay period.
Hi,
I was reviewing my 2019 tax return, and line “13499” says my gross self employment business income is $37,000. Could it be that despite this amount, I am a small supplier (see below), or do I need an HST account?
To get to $37,000: My wife and I have a snow shovelling business. It is a 50%-50% partnership. (My percentage of the partnership is 50%) In 2019 the gross income for the business was $28,000.
The gross income for my other business, a furniture-assembly business was $9,000.
There are two T2125s that show up on my income tax return. The snow-shovelling-partnership T2125 and my furniture-assembly T2125.
My understanding is that I am not associated with the partnership because I do not get more than 50% of profits. I am thinking I am a small supplier based on $9,000 gross income. But I am worried because the CRA will see the $37,000 amount.
Am I understanding this all wrong? Am I associated with my wife? Am I associated with the partnership?
Hi Mark, this is a great question! And by ‘great’ I mean that I’m not sure I know the answer.
Sometimes when I haven’t encountered a specific question before, I can fairly confidently answer it anyway by looking at the nature of the issue and applying my knowledge of the Canada Revenue Agency (CRA)’s policies and intentions. The problem is that your situation is a little ambivalent.
On the one hand, partnerships can have their own GST/HST numbers, and those GST/HST accounts have slightly different rules from those of sole proprietorships like your furniture assembly business. The fact that they are treated differently suggests that they are also treated separately, which would suggest that you don’t have to combine the income from the partnership and the sole proprietorship in order to determine your GST/HST obligations.
On the other hand, income from a partnership is still considered part of self-employment, to the point where the partnership income and the sole proprietorship income is shown as a combined amount on your T1 return, which suggests that you treat the income from both sources as a single amount and therefore do need to register.
In situations like this, I think you’re best off talking to CRA and getting an agent’s take. Call the business line rather than the personal line: 1-800-959-5525. Tell the person who answers that you have a question about determining the small supplier threshold when you have both a partnership and a sole proprietorship. That should scare the agent into sending you up the line to someone with some experience. You will never have to provide any identifying details in order to get this kind of information, so don’t worry that you’re going to paint yourself into a corner. CRA agents are there to help taxpayers understand and fulfill their obligations, and they don’t work on commission.
Good luck!
Hi,
You are amazing… like really. Thank you for answering everyone’s questions since you started posting this!
I have been searching high and low on whether online courses will need to collect GST/PST in Vancouver… does it matter if I run an online class for children or adults? I plan to run a writing and speaking class online but I’m not sure if I should register for GST/PST should I go over $30,000?
Thank you so much for your time in replying!
I appreciate this so much!
Hey Gem, thanks for your kind words! I can’t speak to the PST, because each province has its own rules. In terms of the GST, however, yes, you should register if and when you go over $30,000. It doesn’t matter whether you’re teaching kids or adults, because the only kids lessons that are exempt from GST/HST are music lessons. One thing to remember if you’re offering a service online: once you’re registered you charge the GST/HST at whatever rate your client’s province charges. So if the customer is in Ontario, you charge 13%; if they’re in Alberta, 5%, and so on.
Hi there!
I must say admire your diligence in reply this thread!
I would like to ask, do I need to register for GST/PST for fees earned through giving online classes and courses for kids and adults? This is not tuition nor school affiliated courses. In the case, when I hit $30,000 a year do I need to charge GST/PST?
Thank you in advance!!
Thanks, Mia! If you are located in Canada and offering online courses and classes, you would have to register for the GST/HST (note, I am not commenting on the PST here!) once you cross the $30,000 threshold. The only exception would be if you are offering music lessons to children. The income from music lessons to children is exempt from GST/HST, so it would not be included in your revenue for the purposes of calculating the $30k. So if your revenue from everything except children’s music lessons exceeds $30,000 in 12 consecutive months, it’s time to register. Remember that the amount of GST/HST you charge depends on where your students are located, not where you are located. I.e., you charge an American 0%; a person in Ontario pays 13%; a person in Alberta pays 5%.
As for PST (provincial sales tax), each province determines the rules differently so it is best to get advice from your province’s Ministry of Finance.
Hi Sunny,
I am an associate dentist at a dental office. We do not charge gst/hst on our services. But I have registered a gst/hst account because I do make more than 30,000 a year. I read in some of your answers that people refund some money on the gst/hst they paid for the business? Could you clarify how you get refunded and what exactly you are getting refunded for. How would you file this?
Could you also give some examples on what things/items are refunded able?
Thank you for your time.
Hi Chris. Unless you are offering some services that are not tax exempt, I’m not sure you should be registered at all. As a medical professional, your services as a dentist are GST/HST exempt, meaning they are not taken into consideration when calculating whether you’ve crossed the $30,000 threshold. However, it is possible that in addition to your tax-exempt services, you offer some services that are not tax exempt, and if sales of these products/services exceed $30,000/year then you would indeed need to be registered. The GST/HST you can claim back is any GST/HST you spend on your business (e.g., commercial rent, office supplies) but NOT the GST/HST associated with expenses that relate to your tax exempt services. Some examples:
If you only provide tax-exempt services, you shouldn’t be registered for the GST/HST and can’t claim back any GST/HST on your expenses.
If you provide a combination of taxable and tax-exempt services and are registered for the GST/HST, you charge GST/HST on the taxable (but not the exempt) services, and can claim back the GST/HST you spend on expenses relating to the taxable services. For example, an optometrist who also sells eyeglasses is a combination business. Her services as an optometrist are GST/HST exempt, and she cannot claim back any of the GST/HST she spends on her optometry equipment. However, she also purchases eyeglass frames and display racks from vendors who charge her GST/HST. These latter expenses relate to her taxable sales, so she can claim this GST/HST back.
Not all combination businesses’ expenses are so easily split, however, and when expenses are shared between both sides of the business (e.g., commerical rent, which is subject to GST/HST; cleaning services) it’s not always a simple thing to determine exactly how much of the GST/HST spent can be claimed back.
To learn how the GST/HST system works, including how to claim back GST/HST spent on business expenses, I recommend you check out our free guide to the GST/HST. Check out the bottom of the post on this page and you should see a link that will allow you to download it for free.
Hi,
I’m new to hear about HST register.
I’m a insurance broker, and I have registered a small business account to receive commission.
Is insurance broker exempt from register HST?
Thanks
Hi Gladys. As it turns out, you’ve asked a question that doesn’t have an easy answer. What’s at issue is that certain financial services (e.g., bank fees) are considered to be exempt from the GST/HST, and therefore a person/business offering only financial services doesn’t have to register. So the question is, are you providing financial services? Or some other kind of service (which would mean you do have to register)?
From the Canada Revenue Agency’s point of view there is no one answer to this; it all depends on the specific details of your business and your role. CRA bases its determination on whether or not insurance brokers must register for the GST/HST on what they call the ‘basis of fact.’ In CRA-talk, the basis of fact means that something has to be logical in the real world, rather than just ‘on paper’. Generally this means that a reasonable human being has to look at the issue as a whole and make a decision as to its nature and how it relates to their rules. In situations like this they often create a document called a memorandum outlining their general perspective on the issue, that serves as guidance to taxpayers and agents alike. CRA’s memorandum on insurance brokers and the GST/HST is here:
https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/17-9/insurance-agents-brokers.html
If you’re lucky, you’ll find an example right in the memorandum that fits you closely enough that you can see for yourself whether you would be subject to the GST/HST or not. If you’re bold, you’ll take your best guess and either register or not bother, depending on your personal opinion of where you think you stand. But if you can’t get a clear answer from the memorandum and you’re uncomfortable guessing, you need to call GST Rulings to get an expert opinion.
The job of GST Rulings is exactly that: they look at complex situations where it’s not clear how the tax code should apply, and they make a determination, or ruling. You can reach them at 1-800-959-8287. Good luck!
Hi Sunny! Music teacher from Alberta here, I’ve been researching and finding music lessons to be exempt from GST, but would it still be beneficial to register? I will be reaching the 30k threshold soon and I’m just looking ahead. I teach privately out of my own studio and I am not affiliated with any schools or anything like that. Thank you!
Hi Mackenzie. It’s not really beneficial to you to register, if tax-exempt music lessons are all you provide. This is because when income is tax-exempt (that is, exempt from GST/HST), you can’t claim back the GST/HST on expenses relating to earning that exempt income. Moreover, exempt income doesn’t count towards the $30,000 threshold, so you’re not obliged to register.
Now if you also earn self-employment income from other types of services, e.g., as a musician or composer, that income is taxable, which means it is part of the $30,000 calculation, and if/when you register for the GST/HST you can claim back the GST/HST spent on expenses that help you earn that taxable income.
Hello!
I have recently (last week) opened a Registered Massage Therapy sole proprietorship business. It’s currently Nov 2020 with only 2 months left of the year.
I asked around and I’m getting mixed reviews about applying for an gst/hst #.
I want to be able to write off my rent, start up fees and cost I’m close to 1500$ in just a couple weeks.
Do I need an hst # to be able to write this off on my taxes and how much of that is written off?
If I do not have an hst # can I write anything off that I am putting out to get started?
Is it better to get the hst # or should I hold off till Next year before applying???
You can write off your expenses even if you’re not registered for the GST/HST. The advantage of being registered right now is that if you’re spending GST/HST on your expenses, you could claim it back on your first return.
The value of claiming this back of course depends on how much you’re spending. In your case, remember that residential rent, i.e., for your home office, has no GST/HST; but if you’re paying commercial rent, e.g. for an office outside your home, there is GST/HST charged on top.
To learn more about business deductions, you can download a copy of our free guide, Business Deductions Made Easy by clicking here. We also have a free guide to the GST/HST, GST/HST Made Easy, which you can download here. Good luck!
Hello,
A few months ago, my forest was harvested for timber by a local saw mill. After a careful examination of my invoice (i.e. I was careless not to take a closer look before)I was also given an HST amount. This was a one-off since a hardwood forest is harvested once in a generation. Even with the income from my timber, my total farm income is still less than $30,000. Since I don’t deal with crops that are applicable to HST (and my farm income is consistently less than $30,000) I never needed or did I want to be HST registered.
What do I do ( I.e. forms? etc.) to remit my HST back to the government.
Thank you very much in advance.
If you mean you were paid GST/HST even though you weren’t registered, you should contact the payer, get the invoice revised, and give them back the GST/HST they paid you. It’s important that you inform the payer, because — even if they don’t mind having paid GST/HST — they may be planning to make a claim to get it back from the government, and they’re not allowed to if it’s been paid to a non-registrant. (And don’t blame yourself! The sawmill is technically responsible for noting that there was no valid GST/HST registration number on the invoice.)
If for whatever reason it’s not possible to revise the invoice, just include the full amount you received — the payment for the timber, plus the GST/HST — as part of your income on your income tax return and pay tax on it.
Even if you wanted to ask Canada Revenue Agency (CRA) to retroactively register you so that you could then go ahead and remit the GST/HST you were paid, they probably wouldn’t do it; normally you have to present at least three invoices showing that you collected GST/HST to get that kind of back-registration to happen.
So don’t bother. If you can’t arrange to reverse the payment, then just declare and pay income tax on the full payment. In practical terms there’s nothing else you can do.
Hi, I see a few things about Uber Eats and such, but what about Door Dash and Skip the Dishes?
My son delivers for them, would he need to register for a GST/HST account? He won’t be anywhere near the $30K mark, but would it benefit him to have one to claim gas, repairs, insurance, registration and phone/data usage?
And then, when we do his taxes, ( I do them, because it’s basic income tax, up until this year ha ha) how will I claim his income? I see the t2125 form, but how do I differentiate between professional income and business income? That is a confusing situation!!
Thank you so much from a concerned Mom
Hi Michelle. Your son doesn’t have to register for the GST/HST. He can still deduct allowable business expenses such as a portion of his vehicle expenses. There is no connection between having GST/HST registration, and being allowed to take business deductions.
As for T2125, just pick business or professional (one or the other, you can’t use both on the same form). It doesn’t make any difference, tax-wise — they’re just optimized slightly differently for entering certain kinds of income-related information — and not in any way that will affect Mark’s tax return.
If you want to continue doing Mark’s tax return, our guide to business deductions might be helpful. Check it out at bit.ly/businessdeductions
Do consider getting professional help at least once if your son is earning any significant income via self-employment, though, preferably through a company that lets you speak with and ask questions of a tax professional. I’m not worried you’ll get yourself into trouble (I hope); just that you might miss a good deduction or tip that could save you a lot of money. Hire someone once, consider it an investment in your own education, and then you can take the job back next year. Could be worth it!
Hello
I work for instacart part time as independent contractor (similar to Uber) I have not made 30,000 yet but may so once I register for fat number do I have to pay right away or can I wait and put once I reach the 30. I am asking because others who have made that amount are having a hard time getting the company to charge the customer for months and so the hst has been coming off there earnings. They company has been eventually adding it to their pay but not until after many weeks of earnings with no back pay of the gst portion. I was going to register prior so that by the time I have to collect it will not happen to me
Hi Cindy. GST/HST isn’t something you (as a business owner) pay; it’s something you collect from your customers, and then remit to the government. So the order of events is:
you register for the GST/HST and receive a GST/HST number;
you quote that number on your invoices and add the appropriate amount of GST/HST to your bill;
you collect that GST/HST from your customers and hold on to it;
you file a GST/HST return with the government to calculate and report the amount of GST/HST you need to remit; and finally
you remit it.
Unfortunately, you are responsible for remitting all the GST/HST you were supposed to have collected, even if you haven’t received it yet. But I don’t think I understand what’s happening here, either. Why is anyone charging GST/HST after a sale has already been made? Have you ever made a purchase from a store and paid only the price on the price tag, while they came back after you later to ask for the tax? Of course not: the tax is charged right at the time you make your purchase.
Once you register, you have the right and the obligation to begin collecting and remitting GST/HST. Before you register, you can’t collect GST/HST. And you also can’t go back to collect GST/HST from old sales if you weren’t registered at the time. So I really don’t understand what’s happening here with your colleagues.
I’m a freelancer/sole-proprietor but all my work is for companies which pay me a specified amount that they determine per project (mostly gig work, editing, writing, etc.). I do not invoice them, and no matter how much I earn, they would not allow me to charge them GST because they are the ones who decide how much I’m paid.
It turns out most of them are U.S.-based anyway, so my understanding is that that means the income is zero-rated and it doesn’t matter anyway. And, if it’s over $30,000, I get a GST number, but don’t need to do anything about it since the companies are mostly outside Canada, right?
But, second question: In the event that I do end up earning more than $30,000 from Canadian companies of this type, but cannot invoice them GST (because, like I say, they just pay a set amount, and I do not actually invoice them myself for any of this work, the pay is fixed), does that mean I have to just pay the GST portion myself (only on the money above $30,000), since I can’t charge the companies that (they won’t pay it)?
So, for example, if I made $32,000 say, I would just have to pay GST on the $2000 portion myself (assuming it was earned from Canadian companies), since the companies I work for are not the type where I would be able to invoice them and ask to be paid more than their fixed pay?
I should also mention, to supplement the question I just asked, all of the gig work I do as a freelancer is online (mostly for companies located in the U.S. and UK, but I just wanted to check about the Canadian companies question as well to be sure.
Thanks for your help!
Hi Brad. Those are great questions!
First of all, you are correct about US and UK payers: they are zero-rated, meaning you don’t have to charge them GST/HST, though you do need to register for the GST/HST if your worldwide sales (including zero-rated ones) exceed $30,000 in a 12-month period.
That said, if you’re working freelance for a Canadian company, they must pay GST/HST to a GST/HST registrant, and to pay it on top of the registrant’s fees; they do not have the legal right to decline. A registrant is collecting tax on behalf of the government. No company can just decide they’re not subject to that tax. These are the government’s rules, not yours and not the payer’s.
If administratively they can’t get you to pay, then yes, you have to take the hit (assuming you’re a GST/HST registrant). Once you become a registrant, you have to take the lump sum you’re being paid by Canadian companies and mathematically split it into two parts, a fee plus GST/HST, and remit the GST/HST part back to the government. (Note that the rate of GST/HST depends on the province in which your payer is located, so the hit to you will be lower if the payer is in BC with a 5% GST rate, than in Ontario with a 13% HST rate).
Again, this is not fair and it’s not legal; it’s not even to the payer’s advantage, because remember that if they pay you your GST/HST like they’re supposed to, they get to claim it back from the government anyway. The whole situation hurts you without helping anyone else. I’m just sayin’.
Your statement about paying GST/HST on only $2,000 out of $32,000 is incorrect. the key point is that once you are registered, you charge it on all your freelance income. For example, if you register and then bill only $5,000, you still have to charge GST/HST on that $5,000.
My advice is to register when you become obligated to do so, and start invoicing your Canadian clients with the GST/HST charged on top of your fees as you’re supposed to, so that you, at least, are in compliance with the law. If the companies won’t pay, they are either uniformed, unprofessional, or shady. Respond accordingly.
Hi there,
I am in a brand new real estate agent and also have side gig of being a ubereats driver. I am debating if I should voluntarily register a HST number even I’m not over $30k. The reason I want to register is because I may able to claim the HST back on the expenses I paid relating to real estates. Is that worth is for me to register for HST number?
however on ubereats they don’t pay me the HST on income I made. So how’s that going to work ?
When I’m trying to register for HST, they asked me these questions, what income are they referring to? What I expect to earn ?
1. Actual annual worldwide and domestic GST/HST taxable sales
2.Actual annual domestic GST/HST taxable sales
3.Account effective date (year, month, day)
Hi Wendy. I’ll do my best to answer your questions.
You can certainly choose to register for the GST/HST in order to claim back GST/HST on expenses. Financially it’s always a good idea, particularly if you aren’t too stressed by the idea of doing a little paperwork now and then.
For UberEats, you can treat this income as ‘zero-rated’. What this means is, you charge 0% GST/HST to the payer (UberEats), but you still get to claim back the GST/HST on your expenses relating to that income. How great is that? Foreign sales, i.e., to the UK or US are also zero-rated.
The weird thing about zero-rated sales/income is, you collect no GST/HST on it BUT it counts toward the $30,000/yr limit. In other words, even though sales to the UK and US would never require you to collect any GST/HST, you would still need to register to collect GST/HST if those sales exceeded $30,000 in a 12-month period. Strange but true (and a good situation for you, because you usually will end up with GST/HST refunds).
The questions refer to what you expect to earn. Note that the term ‘GST/HST taxable’ INCLUDES zero-rated sales, even though you would collect no GST/HST on them. The account effective date should be the date on which, by CRA’s definition, you cease to be a small-supplier (Google this), or the date you choose, whichever is earlier. Remember that you can also register by phone by calling CRA at 1-800-959-5525. That way you can talk to an agent who can guide you through the process and answer your questions as you go. I really recommend this. Also, ask for an annual filing period rather than quarterly, if you want to make your life easier.
To get a better sense of what you’re getting into, please download our free 10-page guide to the GST/HST here.
Hi, I charge/pay HST because I make over $30K. However due to COVID I only made $6K. Do I have to pay HST since I charged it? Thanks
Hi Phil. Remember that GST/HST is a tax charged on top of your own fees, which you actually collect on behalf of the government. So yes, you always need to remit any GST/HST you collect on their behalf. Also, it’s good that you’re continuing to charge it, even though your income is low. Remember that once you are registered for GST/HST (you are registered, I hope…?) you are responsible for charging/remitting it until and unless you cancel or suspend your GST/HST registration.
For a good reference on the subject, please download our free 10-page GST/HST primer here. It should help you understand the system and feel more confident participating in it.
Hello,
Thanks for the post. I am not sure if you will see this comment but this was my first year as sole proprietor and I have couple of very important queries to resolve.
I have made more than $30000 in income this year as sole proprietor and I was not sure that I will have to register for a GST/HST account if I hit this limit. How do I go about doing this? I passed the limit in November 2020.
My client is based in the US and from what I knew I don’t have to charge them for GST/HST. Correct me if I am wrong.
I do have a business name attached to it and I am not operating under my own name. Accidentally I took all the payments in my personal bank account. Do I need a separate bank account and if so, what should I do now?
Hi Nooruddin. I’ll answer your questions one by one.
Yes, you have crossed the threshold, and need to register for the GST/HST. You can do this by phone by calling 1-800-959-5525.
Confusingly, you do NOT have to charge GST/HST to your US client. You have to register because your business has reached a certain size, but even so you will never charge any GST/HST to a non-Canadian client. On the up side: once you’re registered you’ll collect $0 GST/HST (and therefore remit nothing) BUT you’ll get to claim back any GST/HST you spend on your business. So you’ll actually end up with a GST/HST refund every year, which can be fun.
You don’t need a separate bank account, unless you’re incorporated. If you haven’t filed papers to form a corporation, you can just keep using your personal bank account if you like.
To learn more, download our free guide to the GST/HST here.
Hello,
I am self employed and never went over 30,000/per year.
Until last year….(just noticed recently..)..I calculated my totals for last year (2020) as preparing my taxes and noticed I crossed 30,000 on Sept.30/20. Should I open gst account retroactively from that day (or from Oct.1/20) and pay gst I never collected for the last quater? (as I was not aware I crossed the amount)…? Or what should be the right date of gst registration? I apologize for those questions but this is just too confusing to me…Thank you…
Hi Milan. Theoretically, you ceased to be a small supplier as of October 31 last year (the end of the month following the quarter in which you crossed the small supplier threshold) and should have registered by that date. That said, call 1-800-959-5525 to register and discuss it with CRA the agent. They might allow you to just register as of Jan 1 of the current year. In our experience they’ve never been terribly picky, when a well-intentioned business owner registers voluntarily but a little late. Once you’re registered, you’ll need to start charging GST/HST on all your invoices.
If do back-register, and you have already issued invoices during the period during which you’ve now become a registrant, you could re-issue the invoices to request that they pay the GST/HST (they shouldn’t mind if they’re registrants themselves, since they get to claim it back). If they can’t or wont pay it, you’ll have to do some math and take the total amounts invoiced to date and split them into a fee + GST/HST. You’ll take a hit, but hopefully it will be small. We often help clients with this. so feel free to get in touch if you need assistance.
Hello,
I have a generally good understanding, knowledge, and background in accounting, finance, and corporate tax but I am scratching my head trying to figure out a certain situation that has a “technical answer” given the available rules and guidance, but not logical/appropriate from a business operations standpoint. Or at least I’m not finding it easy to see.
The situation is the following: A corporation has multiple contractors (long-term contracts, contributing part-time to full-time weekly hours). Furthermore, some of these contractors also earn part-time incomes from other sources. Now, the majority of them do have HST registrations, but some do not. They do not because presumably, they are under an impression that they are exempt from it. As a corporation paying for services, one is not in a position to provide unsolicited income tax advice to contractors, neither would it be appropriate given that the corporation is not a professional accounting corporation. The contractual agreement also stipulates that all individual income and other tax matters are to be kept separate and independent, including HST-related matters. However, the net payment to those who are registered for HST are deductable for the corporation that is receiving HST for services and then deducting HST for expenses (contractors who render services that help earn that revenue). A corporation is aware that they alone compensate such individuals at well over $30,000 per year. Plus, they receive income from other sources by rendering their services to other entities/individuals. Now, the dilemma is the following – expenses for such resources (contractor compensations) should in fact include HST, and it should therefore be deductible for HST purposes as part of remitted from the collected by a corporation. These individuals (or entities like under sole-prop structure) may eventually be held liable for their mistakes (unwittingly) and for poor quality accounting guidance they receive from their respective accountants, by being asked to remit HST dues retrospectively to CRA. However, a corporation that could have and should have deducted such HST on expenses was not doing so, that way remitting net HST to CRA way higher than they should have and could have, is left at a disadvantage. The general rules do mention that if there is no HST registration and such information is not provided to a payer, no HST shall be paid. Am I right? Now, what would you suggest should the course of action be in this case, that would not leave a corporation remitting net HST to CRA more than they should/could have, without leaving it at a disadvantage, but without providing each such human resource contractor an unsolicited tax advise/guidance, especially when it is stipulated so by a binding agreement governing their professional relationship? Put simply, one is making a payment net of all taxes from which HST is due by the receiver, but because the receiver does not have HST registration, the corporation is unable to rightfully deduct the HST portion for expenses purposes on its end.
Thank you very much in advance.
Hi Nazim.
One warning to the payer/corporation: if CRA examines some of these ‘long-term part-time’ arrangements, they may conclude that the workers involved are in fact EMPLOYEES rather than self-employed. If that happens, CRA will force you to retroactively issue T4 slips and remit CPP and EI on behalf of these workers. This will also serve to retroactively convert that income into employment income, rather than self-employment income, for the workers. In that event the question of GST/HST registration is moot: payers don’t pay GST/HST to employees, and employment income is exempt from the GST/HST small supplier threshold.
That said, assuming the workers are in fact self-employed, the bottom line is that there is NO situation in which the corporation should be out of pocket or at any disadvantage because their contractors should be registered for GST/HST but aren’t. Here are the key points.
1) it is not the payer’s (corporation’s) responsibility to pay GST/HST they have not been charged, and only GST/HST registrants can charge it.
2) It is solely the contractor’s (worker’s) responsibility to register, calculate, and charge GST/HST appropriately. The payer has no responsibility but to pay the GST/HST they have been charged by a registrant. They don’t have to pay GST/HST they ‘should’ have been charged.
3) Deduct the fees (excluding GST/HST) to contractors as a salary/wage/benefit expense; claim back as input tax credits (ITCs) the GST/HST paid to the contractors who are GST/HST registrants. For the non-registrants, pay no GST/HST and claim none back as an ITC.
In conclusion: pay the GST/HST you’re charged, and do your accounting accordingly. If you want to give your contractors a heads-up as a courtesy, warn them about the small-supplier ($30k) limit. Don’t follow up with them, as it has no impact at all on you as the payer/corporation.
Appreciate your insights and the time you took to respond to my inquiry. It is indeed helpful. Thank you!
I received $4000 of CERB last year. My business will be under 30,000 but the CERB will put it over.
Is the CERB lumped in with business income?? Or will I be safe?
cheers from Ruth
Hi Ruth. CRA probably hasn’t figured out every nook and cranny of the rules around CERB, but from what I have seen it will not be considered part of self-employment. You should get some kind of tax slip from the government, which serves to funnel the CERB payment onto a special line all its own. I wouldn’t worry about it.
Hi Sunny,
My friend and I started a dropshipping business in Canada, and will only ship to Canada and US. We haven’t started making any sales yet, but will mostly likely incur expenses (website, product samples etc). Do we need to register with CRA right now and charge the taxes for our province (Ontario) and file our expenses even though we are at $0?
We have a feeling that most of our potential customers will be from the US, what do we do about those taxes? I saw somewhere that says we may not need to charge GST/HST but we need to charge PST? I’m also confused about Nexus. Do we have to register in the US if we make a lot of sale in a certain state?
Hi Angel, I’ll try to answer the questions that I can.
With your current sales at zero, you have no obligation at this point to register for the GST/HST unless you want to. Why would you want to? In order to a) hide your small-supplier status from Canadian customers, and b) be able to claim back (get refunded) the GST/HST you spend on your business expenses. If neither of those reasons is enough to make the paperwork worth your while, you don’t have to register yet.
In Ontario, we don’t charge a standalone provincial sales tax (PST), just the HST, which is a combination of GST and our old PST. If you’re not registered for GST/HST, you don’t collect any sales tax in Ontario at all.
Once your worldwide sales exceed $30,000 in four consecutive calendar quarters (basically, any 12-month period), you cease to be a small supplier and need to register for the GST/HST.
You can’t charge anyone GST/HST before you’re registered, regardless of where your customer resides. Once you are registered, however, you must charge the GST/HST to all Canadian customers. You technically also charge it to US customers, but you charge it at 0%. Meaning from the perspective of the US customer, there is no sales tax for them.
Please note that all the preceding information relates to the GST/HST. Filing and paying income tax is a separate issue.
The only Nexus I know about is a cross-border system that makes travel easier and faster for people who go back and forth regularly, which is a customs/immigration thing rather than a tax thing. Not my area of expertise.
I am bakery and I don’t pay taxes on a lot of my products as milk eggs flour .. so I don’t have a GST for this reason .. I’ve spoken the CRA and they have never said to get one as again most or all my products are non taxable .
As I am over the 30k but do pay taxes on the money I make .. should I still get one .. ??? When u go to the bakery at a grocery store or any other store it’s flat .. 10$ for cake is 10$ fir cake .. their is never taxes on cake so how does that fit in .. I want to make sure I’m doing everything correctly but it’s hard when really the only thing I pay taxes on are boxes and boards
Hi Melissa. First off, no one pays GST/HST on anything if the seller (you) aren’t registered to collect GST/HST. So the fact that your customers don’t pay any tax (yet) may just be because of that. But I suspect that your products are considered groceries, and that is the reason your customers don’t expect to pay GST/HST. As we all know, there’s no tax on groceries. But that’s not the end of the story.
Your situation points up an important distinction: zero-rated vs exempt. I’m guessing your products are non-taxable not because they’re exempt, but because they are zero-rated. The difference is: if you have exempt sales, you don’t have to register for the GST/HST. But if your sales are zero-rated, and exceed $30,000/year, you must register even though you still won’t be charging GST/HST on your products.
So if I’m right (that is, that your products are considered to be groceries/zero-rated*), here’s what you do: you register for the GST/HST if your sales exceed $30,000/year. When you file your GST/HST return, you report the amount of GST/HST you collect (probably $0, if your products aren’t taxable) and claim back the GST/HST you spend on your business (e.g., your boxes and boards, but also the rent on a commercial space, the purchase of kitchen equipment, the cost of the computer you use to run your business). You will probably end up with a refund!
*Check CRA’s rules about what constitutes groceries, and make double-sure your products qualify. If in doubt, get in touch with us at Personal Tax Advisors and we can help you out.
Hi there, I am having a hard time figuring out what counts toward the 30,000 income that triggers having to collect HST. A friend and I run an Etsy shop. Last year our total incoming funds was slightly over 30,000 but the cost of our shipping labels was included in this sum — so the total Etsy has under “sales and credits” includes over $10,000 in shipping label costs. Do we need to start collecting HST? Thank you!
Hi Carly, I’m hoping I understand your situation. I’m assuming that what you mean is, your customers paid (or reimbursed) you for the shipping labels. If your customers paid over $30,000 into your business in a 12-month period, you need to register for the GST/HST and start charging it to your Canadian customers.
If I’m misunderstanding the situation, then we might be better off having a conversation. Drop us a line directly and maybe we can get a little more clarity.
Hi thanks for this opportunity to ask questions. A friend and I share a selling platform account to sell vintage items. She posts her things and I post mine and we keep our finances separate but we sell under the same shop name. On my tax form, can I indicate I am my own entity and she indicate that she’s her own entity? We itemize and keep record of each of our own sales. We don’t do any profit-sharing or anything like that so it doesn’t seem like the shared partnership on the business income applies since we are not really sharing anything, other than the name of the shop. But if we add our totals together (including shipping labels – which is actually close to half of the total income that we’ve made combined), it exceeded 30,000 in November past. We want to do things by the book — but because we had been considering our sales separately, passing that threshold didn’t trigger us to wonder about HST until just now when we started to consider how CRA would see this. The other issue is that the reason we passed the 30,000 in combined sales across the two of us is due to a couple of large sales that were way out of ordinary. From the numbers for Jan and Feb of this current year, there’s likely no way we’re going to even approach 30,000 this year. If we do have to register for GST, at what point can we cancel our GST account again? Thoughts? Thank you!
Hi Carla — are you also Carly? Because now I kind of wish I’d read this question before answering the last one!
In my opinion, given the information I see here, you could go ahead and consider yourselves two separate entities, neither of you exceeding the $30,000 threshold. It doesn’t really matter that you share the Etsy platform — Etsy doesn’t get to decide what your business structure is.
If you were to register for the GST/HST, you generally would have to stick with it for one full year before you could suspend or cancel it.
Hi,
What should do a person who passed the famous $30,000 threshold in a year and did not open a GST number and the year passed? What would be the remedies on this case? The GST number was obtained open the next year.
Thanks
Hi Juan, sorry it’s taken me four months to respond. We were pretty busy in April 🙂
If you registered later than you should have, but before CRA noticed, you should be fine. Unless and until CRA insists that you move your registration date backwards retroactively*, you don’t have to do anything but manage your GST/HST properly going forward.
*If they haven’t done it yet, they probably never will.
What about GST on the sale of a waterfront property that rents Dock Space? If the total rent is less than $30,000 Annually then a GST number is not required, but what about when you sell it? Do you have to charge GST/HST on the sale? If so, how to calculate how much is personal use versus rental income/use?
There are two completely separate issues involved here. The first is the rental of the dock space, the second is the sale of the property.
With regard of the dock rental: all commercial rent is subject to GST/HST. If you are renting out the space as anything other than residential rent, you must register for the GST/HST and charge GST/HST on the dock rental.
With regard to the sale of the property, the determination of whether the property is subject to GST/HST depends not on the dock rental, but on the nature of the property. If the property is primarily a personal residence, there’s no GST/HST on the resale of the property. But if it is considered a commercial property, there is GST/HST on the sale.
Note also that the dock rental business will end with the sale of the property, since the original owner will no longer be operating that dock rental.
My husband is starting his own plumbing business and one of the jobs requires a gst number to bid and estimate- even though we will be under the $30000 dollar amount, we still need this number- do we still have to file a quarterly or yearly with the CRA?
Yes. Once you have registered for the GST/HST you must collect it as required on ALL self-employment income and file returns regularly, even if you don’t meet the $30,000 threshold. After you’ve been registered for a year, you can close the account if you know you won’t earn over $30k going forward. For a modest business like this, you can request to file only once per year, to minimize the paperwork. Just make sure to collect GST/HST as required and set it aside so that you can remit it after you file. Don’t accidentally spend it!
Hi,
I work in a long term care facility, working for a physiotherapy company that is contracted to do the work in the home. I work for the company and they consider me a self employed contractor. The company pays me an hourly wage, that they determined, after I submit my hours to them. They then submit the hours to the home which gets funding from the government. I do not charge hst to any clients because I bill the company, yet according to the government I still have to register for hst if I exceed $30 000. Years ago I ended up paying a large hst amount to the government because I didn’t know this and now basically make sure I never exceed $30 000 in income to avoid paying out of pocket. It appeared as if there was an exemption to this but the government rejected my claim. Is this still the case? It seems unreasonable because I can never charge hst since the government controls the funding.
Thanks,
Chrisa
It may depend on what you do. Depending on the province and exactly what you do, your services may be considered GST/HST exempt or zero-rated. If they’re exempt, you may not have to register at all, but you need to show CRA that you’re in a province where your services are exempt. If they’re zero-rated, you may have to register, but each GST/HST return you file will show that you didn’t need to collect GST/HST and therefore there’s nothing to remit. Plus, you could claim back GST/HST on any expenses related to earning your freelance income.
You should never have to minimize your income to avoid remitting GST/HST. You should either be paid it by the company (they shouldn’t actually resist this, since they themselves get all the GST/HST they pay you refunded back to them by the government when they file their GST/HST returns), or in the case of exempt or zero-rated services, you shouldn’t have to collect or remit anything.
I’m sorry if that’s confusing and I’m afraid I can’t be more specific here. If you’d like to discuss further, get in touch with us via our Contact page and we may be able to provide more detailed information when we know more about what you do and the arrangement between you and the payer.
Hi there, for home based small business with overall total income of less than $15,000 without a number company, am I able to write off the complete interest I’m paying on my car loan ( car being used for business only) and portion (how much?) of the mortgage interest?
Hi Sami. You don’t need a certain income level or a numbered company or a GST-HST number or anything else to be allowed to deduct business expenses, including expenses based on car use relating to business and mortgage interest. However you should be aware of a couple of rules.
If your vehicle is used solely for business you can deduct the interest, so long as the car cost no more than $30,000 before tax, and the total interest does not exceed $300/month. If the car cost over $30,000 you’ll have to prorate the interest so as to only deduct the portion relating to the first $30,000.
Mortgage interest must be prorated by the amount of floor space that is dedicated for business use. You can calculate this by square footage, or by number of rooms. And the business-use-of-home deductions cannot create or increase a loss. Meaning that if you have $1,000 of business-use-of-home expenses but deducting them brings you to a $700 loss, you have to pull back and only deduct $300 of the business-use-of-home. The unused business-use-of-home expenses can be carried forward to a future year.
BTW if you’re using my answer to obtain your certification, you owe me a beer! 😉