This article is for informational purposes only and does not constitute legal, accounting, or tax advice. The information contained herein is subject to change and may vary from time to time in your region. For specific advice applicable to your business, please contact a professional.
Tax laws can seem a little intimidating, whether you’ve been in business for years or you’re just starting out. We know, learning the ins and outs of the various tax laws — what you need to do and when you need to do it — might seem daunting, but it doesn’t have to be.
Say you’ve been in business for a few years. You’ve garnered new clients and your profits are continuing to grow. A fellow business owner mentions to you that you might need to look into GST registration. But, what’s that?
What’s a GST Number?
The Canada Revenue Agency (CRA) assigns a Goods and Services Tax (GST) number, or business number, to your business in order to track collection, reports, and remittances of GST or Harmonized Sales Tax (HST). But a GST number is also used for any other business you might have or do with the Canada Revenue Agency.
For instance, if you’ve structured your company as a corporation, you use a GST number to report your corporate income tax. Additionally, if you have any employees in your business, you use the GST number when reporting and remitting payroll deductions. After you obtain your GST number, you must also place this number on every invoice going forward.
But does your business require a GST number? And how do you know?
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Do You Really Need a GST Number?
Most businesses in Canada have to register for a GST number. In fact, registering for a GST number is mandatory for all Canadian businesses unless the Canada Revenue Agency deems the business a small supplier.
According to the CRA, a small supplier can be a sole proprietorship, a partnership, or a corporation - if the company’s taxable revenues are less than $30,000 (before expenses) each quarter. It’s important to note that sales taxes assigned by provinces and income from capital property sales aren’t included in this calculation.
But even if all other aspects of this Small Supplier rule apply to you, you should know that you may still have to register, depending on the type of business you own. If you operate a taxi or limousine service, you must register for a GST number. Additionally, if you’re a speaker, singer, or some other type of performer who does not reside in Canada but sells tickets for admission into performances or seminars taking place in Canada, you must register for a GST number.
As of July 2021, any businesses operating a marketplace or other platform that offer digital products to Canadian citizens, such as online music streaming – regardless of where the business is physically located – need to register for GST. These digital marketplaces must collect and remit both GST and HST, whichever applies to the province in which the digital products or services are sold.
If You’re a Small Supplier, Should You Register Anyway?
If you qualify as a small supplier according to the CRA, you’re not required to register for a GST number — but it can still be beneficial. For instance, if you’re registered, you can reclaim all the GST or HST that you pay in after purchasing anything for your business at the end of the year through Input Tax Credits. If you’re just starting your business, it’s an intelligent decision to go ahead and complete a GST registration — then you can claim all the GST/HST you pay in on the supplies or purchases you make for your business’s start-up.
Wait, GST, PST, and HST — What’s the Difference?
GST, PST, and HST are abbreviations for:
Goods and Services Tax
The GST is a federal-level sales tax imposed on nearly all sales and purchases.
Provincial Sales Tax
The PST is a provincial-level sales tax imposed on nearly all sales and purchases.
Harmonized Sales Tax
The HST is a tax imposed on nearly all sales and purchases that are a combination, or harmonization, of that province’s sales tax and the GST.
If your business is in, or does business in, Québec, Revenu Québec handles these calculations and payments. If you do business in Québec and in other parts of Canada, you’ll be responsible for Revenu Québec payments and payments to the CRA. It’s a good idea to have a financial advisor or accountant on your side to help you navigate these waters.
When Should You Complete Your GST Registration?
You might think you need to apply for a GST number right away. And while that certainly doesn’t hurt, the truth is that it actually depends on what type of business you operate and your expected annual revenue. If you think your revenue prior to expenses will be more than $30,000 per quarter you should register, but companies with takings that are less than this do not have to register, as stated above.
That said, what if you just happen to have an excellent quarter or two? Do you need to register? Not necessarily. According to the Canada Revenue Agency, companies mandated to register for a GST number must have had more than $30,000 in revenue in each of four consecutive quarters. However, it’s worth mentioning that you must total your past four quarters. If the total is $120,000 or more, you must register for a GST number. But remember: Even if your quarterly and yearly totals are less than the threshold and you want to be able to claim those input credits mentioned above, you should register as soon as possible.
If you make in excess of $30,000 in one calendar quarter, you’re no longer considered a small supplier and must register for GST/HST collection. You must claim GST/HST on the supplies or inventory that caused you to earn over the $30,000 cap. For detailed information, please see the CRA website.
You Lost Your Small Supplier Status — What Does It Mean?
If your business has revenues greater than $30,000 in any calendar quarter, the Canada Revenue Agency no longer recognizes your business as a small supplier. This means that you must register for a GST number and begin collecting these taxes on your goods or services and remitting them to the CRA. Once you cross this threshold, you have 30 days from that date to apply for your GST number. You can find more information on how and when you must register and begin collecting GST/HST on the CRA website.
How Do You Register for a GST Number?
To get your business’s GST number, simply contact the Canada Revenue Agency to begin the application process. The process is incredibly convenient, as there are three different ways to apply:
• By mail
• By phone
You can apply for your GST number online by heading to Business Registration Online, or BRO. Applying for registration online is not only easy, but also advantageous because registration isn’t limited to just GST numbers. You can register for corporate, payroll, and other taxes at this site, and, depending on the province your business is in, the site will automatically transfer you to the correct business registry where you can register for that province’s requirements.
You can go to the Canada Revenue Agency website and download a request for a Business Number, fill out the form, and mail it in, or you can call the CRA directly at 1.800.959.5525 and complete your registration over the phone with a representative. If your company is in Québec, call 1.800.567.4692 to reach Revenu Québec and complete the registration.
Afterwards, the CRA or Revenu Québec will send you notice of your registration acceptance along with your company’s registered GST number. Make sure to keep the number some place safe.
You Received Your GST Number — Now What?
After you receive your business number, it’s time to begin collecting tax and remitting it to the CRA. It’s a good idea to create a separate account for maintaining your GST monies.
Now that you’re collecting this tax, when should you file and when should you remit?
Depending on your annual revenue, you have the option to file monthly, quarterly, or annually. The CRA guidelines for GST tax filings are as follows:
If your annual company revenues are $6 million or more, you must file every month. If your revenues are between $1.5 million and $6 million, you can still file every month if you desire, but you’re required to file quarterly. Companies that make less than $1.5 million annually can file monthly or quarterly if so desired but must file at least yearly. You can find more detailed information specific to your type of business on the CRA website.
Depending on your industry, there may be filing periods in which you’ve collected no GST. In that case, you still must file, indicating your company hasn’t collected any GST. Just like GST registration, filing can take place online or through the mail, but you can also file in person at any financial institution that accepts CRA payments.
Armed with this knowledge you can have faith moving forward, whether you have to — or choose to — register for a GST number.