As a work from home business owner, should I register for GST/HST

GST Registration ... HST Registration ...
Should I Register? Must I Register?

by L. Kenway BComm CPB

What You'll Find In This Chat ...


In my last chat, I discussed and answered the  question, "What is GST / HST?"

Now I'll look at the process of  GST registration / HST registration in Canada ... so you can claim your input tax credits.

HST stands for harmonized sales tax ... GST stands for goods and services tax. Get your cup of tea (bring the whole darn pot!) and meet me back here so we can start learning the ins and outs of GST/HST registration.

HST GST registration is mandatory if a business's taxable sales exceeds $30,000 annually.

If you are registered for GST, you are automatically registered for HST as well. I discuss how to file your GST/HST return in part two of this series.

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The exceptions (there are always exceptions) are taxi or limousine operators. They must register regardless of their sales volumes.

If your business earns less than $30,000 in yearly sales, then registration is optional ... but hold on before you click away ...you may want to voluntarily register for GST/HST ... keep on reading to find out why.




A Guide to Understanding GST/HST in Canada
Click on any image below to go to the chat.

GST/HST Guide Table of Contents

Table of Contents
GST/HST Guide

Registering For GST/HST

Registering For GST/HST

What happens after you have registered for GST/HST?

After You Are Registered

Place of Supply Rules

Place of Supply Rules Flowchart
Charge the Right Rate!

HST Invoice Presentation Rules

Invoice Presentation Rules,
3 Methods of Accounting

Returning to PST in BC

Self Assessing Out of Province Purchases, PST Basics in BC





Notice to Visitors

Before I begin I would like to remind you there is a difference between information and advice. The information provided in this article or on this site should not be construed as advice. Please make yourself familiar with my disclaimer.





BOOKKEEPER'S HANDY REFERENCE

The Meaning of Taxable, Zero-Rated, or Exempt Supplies

Goods and Services Tax Rate Claim ITC?
Taxable - all goods and services unless listed as exempt or zero-rated GST 5%
HST 12-15%
yes
Zero-rated - basic groceries, prescription drugs and dispensing fees, medical devices, exports 0% yes
Exempt - residential rent, used residential housing/complexes, long-term residential accommodation, most health, medical, and dental services, child care services, personal care services, tolls, legal aid services, many educational services, music lessons, most financial institutions and insurance services,some non-profit services Exempt NO

Need more information? You will find a more complete listing of taxable and exempt items on the CRA website under Businesses> GST/HST> Taxable or Exempt? .

Good references for any bookkeeper or small business owner are these pdf documents:

  • Ontario "What's taxable under the HST and what's not?" at http://www.rev.gov.on.ca/en/taxchange/taxable.html
  • British Columbia (BC) "What's taxable under the HST and what's not?" at http://hst.blog.gov.bc.ca/wp-content/uploads/2010/05/GST_PST_HST_List_v04.pdf
  • British Columbia (BC) "What's taxable under the PST and what's not?" at http://www.pstinbc.ca/media/2013_GST_PST_List_WEB.pdf.pdf
  • P.E.I "What's taxable under the PST and what's not?" at http://www.peihst.ca/index.php3?number=1043686&lang=E

Just as an aside ... I'm a dance fan ... can you believe that music lessons are HST exempt and dance lessons aren't? (Well there is an opportunity for some dance lessons to be HST exempt if you are a non-profit. See CRA's RC4081 page 11.) What's up with that? Both are performing arts! I just don't get it!!!!!

Click here for GST/HST Rate Table.

BC HST has point of sale rebates that went into effect July 1, 2010. Find out more here.

Ontario HST has rebates and exemptions that went into effect July 1, 2010. Find out more here.

P.E.I. HST will have rebates and exemptions that go into effect April 1, 2013. Find out more here.


GST Registration - HST Registration
A Tax Planning Opportunity

Registering for GST/HST can put more money in your pocket ... the secret is input tax credits.

Put More Money In Your Pocket - The Benefits to You

It is recommended that you voluntarily register for GST/HST even if your annual sales are less than $30,000. Why? ... HST GST registration enables you to recover your input tax credits (ITCs) on business purchases and GST/HST paid on startup costs.

If you decide to voluntarily register (i.e. your sales are under $30,000 per year), you WILL be required to charge and collect GST/HST on your products and services that are not zero rated or exempt. You will also BE ELIGIBLE to claim input tax credits (see the next section for what this is all about.)

Who is Authorized to Charge GST/HST?

Let me just point this out ... if you are NOT a GST/HST registrant, you are NOT authorized to charge and/or collect GST/HST.

So what do you do if you are charged GST/HST by a business that is NOT registered?

What do you do if you charged your customers GST/HST but are NOT registered to do so?

Follow the links to find out how do deal with either of these circumstances.



What are Input Tax Credits?

ITCs are credits you are allowed to claim to recover any of the HST GST you paid on your business purchases. This means GST/HST is paid only by the end consumer as your GST/HST ITCs neutralize the tax for your business.

You must be registered to claim them. You cannot recover ITCs incurred prior to HST GST registration. This is where good tax planning comes in.

By voluntarily registering your business while you are in the startup stage, you will be able to recover your startup costs. If you wait to register, you have lost out on recovering your ITCs related to your startup costs. CRA does not allow (in most cases - there are always exceptions as I said earlier) you to retroactively register.

GOOD TO KNOW

Capital Assets and ITCs

You can recover some of your missed startup ITCs after your HST GST registration by ... bringing your capital assets that are still in use by your business onto your books at their current fair market value ... and claiming the GST/HST ITC on the transaction. ;O) Your expensed ITCs prior to your registration are lost. :O(

You can find instructions and a worksheet to help you value your assets in accordance with CRA rules. Select the A to Z index on the left hand navigation bar. Under Business choose R. Look for Reporting > Business Income. Select Claiming capital cost allowance (CCA) > Personal use of property. Page down until you come to Changing from personal to business use.

Make sure you take time to educate yourself about CCA ... especially the available for use rules and when the first fiscal period is less than 365 days.


source: CRA GST/HST policy statement P-019R Eligibility for ITC on "start-up" costs - Eligible capital property




Consider this - By not being an HST GST registrant, you do lower your prices to your customers (hey they gotta love that) by 5% (our current rate) but hold on ... you also increase your cost of doing business 5% by not being able to claim the ITC as a non-registrant ... hmmm ...

There is the disadvantage that once HST GST registration occurs, you will have to track the GST/HST collected and paid out. But I think this disadvantage is offset by the reduction in your total taxes paid.

An added benefit of HST GST registration - it makes your business look more credible and legitimate. Remember, GST/HST is tax neutral to registered businesses. The customers that will be most affected by your decision to charge HST GST are retail customers. If most of your competitors are charging HST GST, then these retail customers should be neutral to you being a HST GST registrant and charging HST GST.



Free GST Registration - Free HST Registration
Startup Costs and Your First Audit By CRA

Once you have completed your free HST GST registration (see below for more information), you will have to file your first return. Here is what you should know.

CRA may audit you the first time you file an GST/HST return with a refund balance. 

The CRA is interested in verifying the existence of your business and your startup costs. They also want to ensure you are aware of your rights and responsibilities and have adequate books and records.

If CRA finds your books and records are unsatisfactory, they will make recommendations and answer any questions you may have. So take the time to do a proper job of your bookkeeping.




How to Register for GST/HST (It's Free)

There is no fee to register for GST/HST. You have a few ways available to you for HST GST registration:

  • by internet - Business Registration Online (BRO) allows you to register for your Business Identification Number, GST-HST, payrolldeductions, import-export accounts and if you are incorporated, corporate income tax. It is self serve. There are also some provincial accounts available. ... Once at the registration site, you will find a list of restrictions after you click on "Register Now" to help you determine if you can use this self serve method.

  • by telephone -you can phone 1-800-959-5525. Look over Form RC1 Request for a Business Number (BN) as you will need all the information on that form available for the agent.

  • by mail or fax - send a completed Form RC1 Request for a BusinessNumber (BN) to your tax service office.





GOOD TO KNOW

If you are NOT registered with CRA (i.e. you do not have an authorized GST/HST number issued by CRA) then you CANNOT charge/collect GST/HST.

If you are registered for GST, then you are automatically registered for HST and vice versa. Please note that when BC switches back to GST and PST on April 1, 2013, you will have to register for PST, it is NOT automatic.




Mandatory GST Registration & HST Registration
Meeting or Exceeding the $30,000 Threshold


When you meet or exceed the small supplier threshold of $30,000 in a quarter, you are considered registered and must begin collecting GST/HST on all sales after the threshold has been met. HST GST registration must officially be applied for within 29 days of collection beginning.

If you meet or exceed the small supplier threshold of $30,000 over four consecutive quarters, you must begin collecting GST/HST one month after the fourth quarter. You have 29 days from when you begin collecting to officially register.

If you do not officially register when you meet the threshold of $30,000, you will lose your ITCs ... ouch! Expensive!

The February 2014 Federal Budget announced that CRA will be allowed to automatically register businesses if they have been notified and failed to comply. The automatic registration will occur 60 days after official notification. This change takes place effective with the Royal Assent of the enacting legislation.


Canada Revenue Agency (CRA) Guides on GST/HST

If you require more information on HST GST Registration, the main CRA guide is Publication RC4022 General Information for GST/HST Registrants. However, there are a lot of pamphlets and booklets published by CRA. Some are specific to different industries like travel and convention, or construction. Here is an index to them all - GST/HST Publications and Forms.


In my opinion, the advantage of HST GST registration is it increases your cash flow and reduces your overall taxes ... which gives you the opportunity to grow your business.


This concludes Part One of my chat on HST GST registration.

Check Part Two of the Guide on stuff you need to know after you have completed your registration.

The Guide Index also has links to HST transitioning, HST bulletins, ITCs and your personal vehicle, GST/HST historical rates and compliance deadlines.

You'll find links to both of these pages below.





It's been great chatting with you about your books today!


See you on the next page ...
Your tutor Lake



Main Reference Source: CRA publications and articles on HST GST Registration

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