Here, for the first time on any stage, the amazing stunt of explaining the entire system of GST-HST in Canada in a single sentence!
As I answer clients’ questions, peruse our great nation’s major newspapers, and fall down the rabbithole of Facebook posts, I encounter so many misconceptions about the GST/HST that I start to worry that no one knows what they’re doing. It makes me queasy.
Like watching that scene in Scent Of A Woman where the blind guy is driving at high speed because he loves life or whatevertheheck – that kind of queasy*.
One client recently told me that he thought that since he didn’t charge more than $30,000 one year, he didn’t have to remit the GST/HST he collected. Someone had told him he could just keep it.
A person who is already an HST registrant asked me if she still has to collect GST/HST before she’s earned her $30,000 in the year or if she can just hold off.
And I’m always encountering people who mistakenly believe that paying their instalments is the same as filing their returns, or wrongly insist that they can get back GST/HST they paid on personal expenses.
Each of these misconceptions is going to lead to major (read: expensive) headaches down the road, and yet the system is very simple at heart. So simple, in fact, that it can be stated in a single sentence. Here goes:
GST/HST registrants collect GST/HST, pass it on to the government, and claim back any GST/HST they paid on business expenses.
That’s all. Virtually everything about the GST/HST system follows logically from that one sentence.
Once you’re registered, you’re registered. There’s no part-registration, or registration that only requires your participation sometimes or after a limit. If you are registered, you collect, report and remit. Period.
How To Register for the GST/HST
Put another way, the GST/HST system is comprised of three steps:
1. Collect GST/HST on sales and spend it on business expenses
2. Report to the government how much you collected and how much you spent
3. Remit the difference (or claim a refund, if you spend more than you collected)
Step one is largely self-explanatory, but there are some key points to note:
• This whole thing depends on you registering for the GST/HST in the first place. It is your responsibility to know when your business has grown large enough that you’re obliged to register. You are the one who has to take note of when you’ve collected $30,000 in revenue in four consecutive calendar quarters (i.e., any year-long period), and voluntarily give the Canada Revenue Agency’s (CRA) business enquiries line a call at 1-800-959-5525 to register. The call itself takes five minutes. It does not cost anything.
• The $30,000-per-year that seems to confuse people regarding when to collect or when to remit only affects non-registrants, in that it determines when your business is small enough that you can legally opt out of participating. However once you cross that threshold you are responsible for registering, and once you’re registered you’re participating – fully, on all business income and all business expenses – until you and CRA agree that you’ve once again become small enough to opt out.
*Admittedly, there were lots of other perfectly valid reasons get queasy watching Scent Of A Woman, not least of which is that it was called Scent Of A Woman. Yeesh.
Continued in the increasingly mis-named The GST/HST In One (More) Sentence
Did you know? Personal Tax Advisors will calculate and file your GST or HST return for free.