GST HST in Canada - Canadian Sales Tax Guide

... after you have completed your GST HST Registration, you'll want to know about:

Goods and services tax is a value added tax (VAT) on goods and services produced by businesses. This tax is passed along to the consumers of the products and services so sometimes it is also referred to as a consumption tax (as opposed to income tax which is a tax on your earnings).

Harmonized sales tax is a combination of the federal GST along with a provincial sales tax component. Instead of two separate taxes, it is a single value added tax. The HST is administered by the federal government who then remits to each participating province.

Businesses operating in Canada are responsible for collecting both taxes and remitting the tax funds to the government ... which means they, not the government, bear the costs associated with the collection.

Canada adopted GST in 1991 to replace the manufacturers' sales tax which taxed the total resale value of a manufacturer's goods ... not just value added

Wikipedia describes a regressive tax as one that "imposes a greater burden (relative to resources) on the poor than on the rich - and there is an inverse relationship between the tax rate and the taxpayer's ability to pay as measured by assets, consumption, or income.

What I find interesting in this is that I always thought of GST as a fairer tax than income tax because everyone has to pay it - rich or poor. The rich have more discretionary income so they spend more and they pay more tax.

The poor and working poor have less to spend so they pay less; and when you factor in:

... the tax is applied mainly to discretionary income which the consumer has control over ... so GST seems more progressive to me than regressive especially when compared to income taxes ... hmmm I'll have to do more research.

If you are interested, I found a great article written by David Sherman, a leading GST tax expert in Canada. He is a tax lawyer.

The article I found is on page 839 of the October 2009 Canadian Tax Journal publication titled Policy Forum: Tax-Included Pricing for HST-Are We There Yet?. It can be located at http://www.ctf.ca/ctfweb/Documents/PDF/2009ctj/09ctj4-policy.pdf.

One of the points in his introduction explains that the United States is one of the few countries in the world that does not have a value added tax. Later in his article (the section is entitled: Tax-Included Pricing Is Better for the Economy), Mr. Sherman explains that tax experts and economists almost universally agree that GST is a "good" tax.

Jack Millar wrote an article for the Canadian Tax Foundation in October 2009 with his case for maintaining tax exclusive pricing. The article is titled Policy Forum: The Case for Maintaining Tax-Exclusive Pricing.

Mr. Millar points out that tax-exclusive pricing results in greater political accountability through increased tax consciousness by taxpayers.

The article can be located at http://www.ctf.ca/ctfweb/Documents/PDF/2010ctj/10ctj1-millar.pdf.

Articles About HST versus PST

... Tony Wilson's (Globe and Mail) Dear readers: I've done the math, and HST wins ... a follow up to his article titled HST is good public policy and a good tax published on September 14, 2010

On September 1, 2010, The Fraser Institute issued an article that debunks 10 HST myths being propagated.

The HST is tax neutral and not a tax grab as personal income tax cuts offset the gain. The HST will have virtually no impact on the average British Columbian and no impact on tax freedom day.

The HST will not increase prices. In fact it will have little impact on prices as the removal of PST on business inputs works it way through the system. The HST broadens the tax base so some previously PST exempt items will increase (but not by 7%) and the price of items not PST exempt will drop. HST removes the preferential treatment of a few sectors.

The HST will make previously hidden taxes visible and save businesses about $150 million in tax compliance costs annually. The BC government will save about $30 million annually in administration costs.

You can read the whole report at fraserinstitute.org> reasearch & news>research topics> taxation> articles> No need to fear the HST.

David Robertson, a tax lawyer with Fasken Martineau presented a paper in September 2005 at the CICA Commodity Tax Symposium entitled Sales Tax Harmonization: The Facts & Nothing But The Facts. The article concludes that when VAT is compared to RST, VAT wins.

"As to the choice between which system is better, it is clear that the value-added tax system is superior as it (a) is more equitable, (b) less regressive, (c) minimizes cascading and double taxation, (d) promotes international competitiveness and domestic prosperity, and (e) is less susceptible to evasion."

A copy of Mr. Robertson's article is available on the firm's web site, www.fasken.com.

Fraser Institute economists published an article in the National Post titled Don't believe the anti-HST rhetoric. The Institute explains how HST works to our benefit.

The new GST HST place of supply rules now place a greater emphasis on the location of your customer.

Generally, HST began to apply to any amount that was paid without having come due OR comes due ... if the amount related to the period July 1, 2010 or later. There were some exceptions.

Take the time to review your bookkeeping work as there is a high probability CRA will be auditing transactions relating to the HST transition period.

HST registration for British Columbia and Ontario works exactly the same as GST registration with all the same rules as GST. Just be aware that as of May 1, 2010, there are new place of supply rules for GST and HST.

A. A non-participating province is a province that does not charge HST ... they charge GST and may or may not charge a provincial sales tax. Currently, non-participating provinces are the three territories plus Alberta, Saskatchewan, Manitoba, and PEI.

A. A participating province is a province that charges HST. Currently, participating provinces are BC, Ontario, New Brunswick, Nova Scotia, Newfoundland and Labrador.

A. You can find the Quick Method rates for BC and the other provinces on The GST HST Quick Method Rates page.

You need to be aware that with the new place of supply rules, you will have different rates depending on the location of your customer in Canada.

You may want to consider changing your method of reporting GST HST to CRA. From a bookkeeping perspective, the Quick Method (and Simplified Method) is more difficult to apply than simply tracking the actual tax.

Follow the links for more detailed information on GST HST invoicing requirements.

The Bookkeeping Forum Q&A Links

GST HST Discussions In Progress

Here are GST HST questions that have been asked in The Bookkeeping Forum. Feel free to check them out and give your opinion or share your expertise.

As more questions are asked, more links will show up here. So if you have a question ... and are willing to be patient while I use my resources to learn along with you ... ask away.

GST on Meals Adjustment What account would you debit to adjust the GST/HST for the amount that is not eligible for the ITC (50%) on meals?

I think GST would be credited for ...

Imputing HST on Receipts I have several receipts (for a course, insurance (car and teaching) and for memberships) that do not state the HST I've paid but only the final amount ...

Do I Have To Charge HST? Last year I was a sole proprietor. I had income above $30.000 and charged HST on all services.

This year I am a full time employee without any outside ...

Sales added to filed GST period In a moment of lunacy it seems I've edited customer invoices and increased the invoiced amount thereby increasing sales revenue in a prior GST period.

How ...

GST Under 30K We are starting a small consulting/teaching business. We registered and got a GST number.

We don't expect to earn more than $30K per year. Are we required ...

HST Installment Payments Hi,

Can I pay an installment on a current Q2 HST payable bill rather than the
whole amount?

I have always attached full payment owing to the quarterly ...

GST/HST ITC on Meal Allowance Can a transportation driver claim GST/HST I.T.C.'s on meal allowance amounts when they have used the $45.00 per day method rather than using actual receipts?...

Annual GST/HST Filer Hi,

I am having difficulty understanding why, when I have a December Year End and sales are LT 1.5 million, I keep receiving a paper return which tells ...

Self Employed Consultant How do I pay GST/HST?

I am a self employed consultant working on commission. I bill a company quarterly for my service.

Do I pay GST/HST on the total ...

HST Charitable Organization Could you explain how to make the journal entry for a charitable organization (which is eligible for a Public Service Body rebate) on their purchase?

Example:...

Manual Bookkeeping Entry for GST/HST Refund According to your topic "Recording GST/HST Using Manual Accounting Systems", the information provided is super, except for the last paragraph which leaves ...

HST Return HST Return for 2010 Tax Year.

Hi Bookkeeping-Essentials,

My small business income is less than $30,000.

I collected GST/HST and paid GST/HST ...

Newbie to Bookkeeping Hi,

I am currently running my own company which I have recently set-up. There is a question which I would like to seek your help on.

I am using ...

HST Bonus from Revenue Canada Our company received a $1,000.00 from the government to help with the HST transition.

We deposited this 'free money' in the bank, so I know I debit ...

GST/HST Split Filing I am an annual HST filer and have paid my PST up to June 30th 2010.

Do I have to file a separate GST up to June 30th then HST from July 1st to Dec 31st ...

Selling Remote Assistance Services to US If you sell remote assistance for software services to US do you charge HST, state taxes or nothing? It is my understanding that when you export ...

HST and Reimbursable Expenses HST - charging reimbursable expenses to clients

How do I include on my invoice to my client the expenses for which they are going to reimburse me?...

Business Startup Expenses and HST HST input credit for a start up business in B.C.

I am in the process of setting up a new business. I am incurring expenses, but do not have any ...

GST/HST and Tax Exempt Bodies We are considering a contract for services with an out-of-province GST exempt body. Some of the work will be done by subcontractors that will charge us ...

GST/HST $30,000 Threshold How does the $30,000 GST/HST rule actually work for a sole proprietor with employees?

If a sole proprietor's company takes in $200K in sales, but ...

Non-Deductible Expenses I've read on your site about being able to claim net GST paid on a personal tax return. I am self-employed and file an annual GST return, I always pay ...

HST Rebate for Charities I stumbled across your site and have appreciated the wealth of information there.

I am a bookkeeper for a charity in BC. Prior to July 1, 2010 we were ...

GST Overpayment I did my GST at the year end and sent the cheque to Revenue Canada...somehow I made a mistake and ended up getting a refund. How do I put this refund ...

Place of Supply Rules For GST & HST On The Rates page, I have information on GST/HST/PST - Out of Province Sales Tax Rates . Effective May 1, 2010, the place of supply rules for intangible ...

GST Exempt Services First off, I'd like to thank you for all the wonderful information found on your website!

Here is my question:

I'm planning on starting my own fitness ...

GST on Mileage When charging mileage as a disbursement to a client I have to collect GST. I charge the current treasury board rate.

To calculate the GST to be charged ...

Recording a GST Reassessment How do you post this a reassessment from an audit where there is additonal GST owing in a prior year?

It is a credit or a liability? It can't be an ...

HST and Private Sale of Vehicle As a sole proprietor in Ontario do I collect HST as part of the sale when I sell a vehicle (used both personally and in the business) to a private citizen?...

When to Charge GST/HST I am a sales estimator sub-contractor. I've been invoicing my boss for my work this current year. I have made over the $30,000 mark and I have obtained ...

GST Charged Incorrectly? My client is a corporation. He is the only shareholder/director.

On a few of his bills that he sent out, he deducted some money that he owed the client ...

HST on Inter-Company Transactions My question is about HST on inter-company transactions.

I have recently been hired to do the books for an owner who has several companies, all in entirely ...

Financial Institutions Exempt From GST/HST I understand Financial Institutions (e.g. let's say one of the big five banks) are exempt from GST/HST for most of their services they offer (e.g. deposits ...

ITCs Home Office As a sole proprietor, my office space at home is 10%.

Are the ITCs prorated at the end of the period? Do I claim 100% during the year?

Is it the ...

Display of Sales Tax on Invoices Do invoices have to show the GST and PST as separate lines or can they be combined?? Hi James,

It is my understanding that CRA requires each ...

GST and Doing Business in Canada Hello,

I work for a company in Mexico. We are sending material to Canada.

We sell transmission towers and we started sending flatbeds into Canada ...

Recovering ITCs on Capital Assets I started a business in 2010 and purchased equipment which included GST. However I did not open my GST account until 2011.

Can I still claim the GST ...

HST & E Commerce We are an internet business with a website for folks to order products online, which are then shipped to the client from a warehouse in Canada or a warehouse ...

USA E-Retailer Selling Goods to Canadian Residents We are a 100% internet retailer based in the USA.

We are an importer of record via UPS in Mississauga ON. What is the requirement for collecting and ...

Reclaim GST Portion of HST Paid Hi,

As a business owner, am I permitted to reclaim the GST portion of HST paid on a purchase (for re-sale) in Ontario?

My business is in a province ...

ITCs vs. Business Expense on Personal Tax Return Hello,

I have a full time job and my husband and I bought a small business last year.

I already claimed all of our business expenses such as bank ...

Reporting HST on T2 When doing your business tax (on the short form) is revenue gross or net of HST?

I don't know why I would have to pay income tax on tax I collect, but ...

When Do I Charge GST? Hi there,

I find your website very helpful but it's a lot to take in when first starting.

I am just begining to start my business as a sole proprietorship ...

GST and US Purchases Can We Claim A GST ITC For US Purchases?

Hi,

Firstly, I love your site. Finally, some advice that's easy to read and understand. Thank you!

I ...

HST Business Transition Supplement How would you account for the HST transition supplement the government pays to qualified businesses?

I'm not sure if I should credit an HST related ...

Home-based Business & GST Hello,

I am a sole proprietor of an Educational Consultant Services based in my home.

I am filing GST returns for the 1st time and would like to ...

PST Filing My husband started a new business as a tool distributor in Ontario. His first day of sales was April 12, 2010. He collected GST and PST until June 30,...

Eco Tax Where does the Eco tax go in bookkeeping and taxes when filing your GST remittance? Does it stay in with your GST input tax credits? Hi Laurel,...

Charging PST in Manitoba Does an independent contractor charge PST for services in Manitoba? As I don't live in Manitoba, I went to the Manitoba government website to ...

HST Charged But No Business Number I was charged HST by a small supplier (less than $30,000 annually). There was no HST number on the invoice. When questioned, the person said he had not ...

GST / HST for Manufacturers Question - For Manufacturers, are 100% of the GST / HST takes paid on any goods and services recoverable, as long as we are registered Canadian taxpayers?...

De Registering for GST I registered for GST when my sales were in excess of $30,000 some 3 years ago.

In 2009 and 2010 my sales did not exceed $30,000 and I would like to ...

Annual HST Return How to File a Dual Rate Return

In 2010 in Ontario until June 30th invoices carried a 5% GST amount. From July 1st the rate became HST of 13%.

Do ...

Eligible Input Tax Credits Is the GST I paid on fuel, vehicle repairs, equipment rentals & materials purchased to complete contract - considered an 'eligible expense' with respect ...

Can I file a NIL GST Return GST/HST Registered - Can I file a 'NIL' GST/HST Return?

I registered my flooring installation business (not a retail business, no materials sold - just ...

GST34 - Appeal Penalty for Filing Late I have recently gotten a job with my company and I was supposed to file/pay the HST return (GST34).

Unfortunately, instead of paying September HST return ...

HST and eBay Do I pay HST on sales to USA on ebay? It is my understanding that as a general rule, sales of goods and services to a non-resident person outside ...

GST HST Collected Out of Province I am a online seller so I sell Canada wide. Do I charge different tax rates depending on where the customer lives; and how do I report all that to Revenue ...

HST Registration and Psychology A psychologist's services are exempt from HST but should she still register so she can reclaim HST paid on office equipment etc?

And should all the ...

Charging HST Out of Province HST charged to AB client? Ontario service sold to Alberta HST? I think you are asking whether an Ontario service company who sells services ...

GST/HST Paid on Purchases Line 105 means GST/HST paid on purchases? Form GST34-2-E(10)

This my first GST/HST return so for example line 101 will receive a zero as I have not ...

T2125 Form and Sales Tax Entering Expenses Into T2125 Form

When entering expenses into the T2125 form, do I include the GST in that expense? Hi Clare,

It depends ...

Sales Invoices for GST/HST Registrants I am just wondering if you could site a CRA reference for your info ( from Creating An Audit Trail ) re:

"A legitimate business receipt for CRA ...

HST/PST over $10 million revenue Do I need to set up a separate general ledger account to separate the PST portion (8%)from the HST general ledger if my annual revenue is over $10,000,...

Accounting for GST/HST Accounting for HST/GST When Not An HST/GST Registrant

I have a small company and I don't collect GST. What do I do with the GST/PST on receipts ...

How To Cancel GST/HST Account I volunteered to register for GST number. I have a lawn cutting business and will make well under the mandatory 30K.

I have not had any business yet ...

GST Filing in QuickBooks® I am new to QB (QuickBooks®).

I would like to know how to clear the last report from filing GST on line.

The last person did not clear the report ...

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.