Why you should register for a GST/HST number

If you’re starting a small business and wonder whether it’s a good idea to register your business right away to collect the federal goods and services tax (GST) or, in some provinces, the harmonized sales tax (HST), the short answer is likely “Yes.” Here’s why!

When must I collect GST/HST?

If your business earns more than $30,000 in gross income (what you earn before you deduct business expenses) during any 12-month period, you must get a GST/HST number and collect GST/HST from your customers. There’s some income that doesn’t count for GST/HST collection, including salary from a job, grants and sales outside of Canada.

If you make more than $30,000 and you don’t sign up, the Canada Revenue Agency (CRA) won’t send you a reminder or a warning – but you’re not off the hook. Eventually the CRA will find out that you should be filing GST/HST returns, and you could face substantial fines.

Should I collect GST/HST if my business earns less than $30,000?

If your business is a gig that isn’t likely to earn anywhere close to $30,000, then you don’t have to register for GST/HST. And you may think this is a good idea. But the truth is, avoiding it may actually cost you money.

After you register for GST/HST, you’ll bill your customers by adding the percentage of GST/HST that applies to your province and the goods or service you provide. When you purchase goods or services from other business that collect GST/HST, you’ll be able to deduct the amount of GST/HST you paid on your GST/HST return to the CRA as input tax credits.

For example, if you do business in Ontario and you charge another Ontario business $100 for, say, mowing its lawn, you’ll bill a total of $113 because of the 13% HST. Let’s say that in the process of mowing, you have to spend $200 getting your mower serviced, so you’ll be charged $26 in HST by the repair shop. When you ultimately file your GST/HST return, you’ll report revenues of $100 plus $13 in GST/HST collected, minus input tax credits of $26, and you’ll likely get a refund of $13 from the CRA.

As a new business, you may be spending more than you’re making, so registering for a GST/HST number may actually save you money in the long run.

How do I register for GST/HST?

Talk with your bank or financial advisors, register at the CRA’s Business Registration Online or call the CRA’s business inquiries line at 1-800-959-5525. Once you register, you’ll get your GST/HST number immediately.