When to Charge GST/HST

by Holly
(Edmonton, Alberta, Canada)

When to Charge GST/HST Can Be Puzzling!

When to Charge GST/HST Can Be Puzzling!

When to Charge GST/HST Can Be Puzzling! Take CRA's Questionnaire - Should you register for a GST/HST account?

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 my G.S.T. number.

Today I go to invoice my boss on the GST owed to me from him. He tells me that his accountant has advised him that he does not have to pay me GST on the first $30,000. He said he will only pay me on the remainder after the $30,000.

I thought it was optional if "I" wanted to charge GST before $30,000. So my question is: Does he have the choice to not pay me on the first $30,000? Is it up to him? Or can I bill him for the full amount of GST which is approximately $1650.00?



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Hi Holly,

Hmm a couple things aren't making sense here for me.

First, if you are an independent, self-employed sub-contractor, any work you do is for clients not bosses. You are your own boss. If you have only one client, you may not meet CRA's criteria for being an independent contractor and may in fact be an employee.

Second, while registering for GST/HST is voluntary prior to earning $30,000, you cannot "backbill" GST. You can only charge GST on sales ... and claim ITCs on purchases ... from the date you became a GST/HST registrant. Once you ARE a GST/HST registrant, you must collect GST/HST ... it is NOT optional.

Third, GST/HST is a neutral tax to registered businesses. However, if your client pays GST/HST on amounts that pertain to a non-GST/HST registration period, he will NOT be eligible to claim the ITC ... meaning the sales tax would not be neutral to him.

I hope my pointers help you answer your questions. If you are still confused about anything, please post back here using the "comments" link below.








P.S. I would like to remind you there is a difference between information and advice. The general information provided in this post or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using this site content for any reason whatsoever.

Comments for When to Charge GST/HST

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Sep 19, 2012
When Do I Charge GST?
by: Chris, Alberta

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 in Alberta. For the first year I don't think I will meet/exceed $30 thousand in sales, so I'm going to go without the GST# for now.

Do I still have to charge GST on every sale of service so I can give it to the government at the end of the year?

Thanks.



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Hi Chris,

Only GST/HST registrants are authorized to collect GST/HST. If you choose not to register when it is not mandatory (under the $30 thousand threshold), then you do no charge GST/HST.

You will also NOT be eligible to claim your input tax credits.

CRA has this great new questionnaire on their website at www.cra-arc.gc.ca> Businesses> GST/HST> Registering an account> Should you register for a GST.HST account?

It may worth your while to take the quiz just to make sure you have made the right choice.


Sep 19, 2012
Do I Have To Charge HST?
by: Jonathan, Burlington, ON Canada

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 income until right now. I just got a one off project for a price of $18,000. I am wondering if I have to charge HST on it

I will have no other income this year (outside of my employment income). I do have a GST/HST number and did file last year.

It would assist if I did not have to charge HST but I wonder if that is going to cause me issues when I file at the end of the year.



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Hi Jonathan,

If you did not cancel your GST/HST account, I am sorry to tell you that you still have to charge HST on your self-employment income.

Here's the general rule ... all GST/HST registrants have to collect sales tax on all self employment income.

Mar 12, 2014
Hairdresser
by: Fran

Hello. I am a hairdresser in Ontario. I work on 50/50 commission. At the end of the day we total our day of services, subtract off HST and then divide in half for my total and employer's total.

My question is: should the employer be taking off the HST on my half of pay? I am also taxed with the usual CPP, EI and both income taxes on my half of pay. Is there anyway I can be refunded for the HST or is this the correct method at a hair salon?

Mar 15, 2014
Re: Jonathan
by: Anonymous

Regarding Jonathan's question. I'm in same situation except I cancelled my HST. How do I deal with HST?



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If you cancelled your HST account with CRA and are below the $30,000 then you no longer have to charge HST … in fact you are no longer allowed to charge HST. It also means you are not allowed to claim input tax credits.

Mar 15, 2014
Hairdresser
by: Lake

Hey Fran,

If you were a self employed hairdresser, CRA has special rules … see cra-arc.gc.ca/E/pub/tg/t4001/t4001-e.html#P1282_133973 .

As you are an employee, your employer has to deduct CPP contributions, EI premiums, and income tax as you would for any regular employees. But you know this already.

HST on all sales is collected in trust and remitted to CRA. Your employer does not get to "keep" these monies. S/he files a report to CRA on a monthly, quarterly or annual basis and remits all the HST collected net of any input tax credits.

If you want the responsibility of collecting, reporting and remitting HST on your sales, you would need to change your employment structure arrangement to be that of self-employed.


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