Taking Care of Business: GST Basics
Talking with entrepreneurs at our monthly seminars with Small Business BC (TaxSense For Your Business), one of the most common areas of confusion is GST. Here, we share some of the key questions that business owners ask.
Who needs to charge and collect GST?
A business that has sales of $30,000 or more in a calendar year (or fiscal year if a corporation) must register with CRA for a GST number and charge its Canadian customers GST or HST.
If your sales are less than $30,000 in a year, you do not need to charge and collect GST. (Note: taxi and limousine companies are exceptions — companies in that industry must register and collect GST from the very beginning of business.)
This is not a cumulative number but rather a year-to-year calculation. In other words, if your business has been operating for three years and each year your income is less than $30,000, you do not need to register and charge GST.
Who is exempt from GST?
There are a few businesses that are exempt, such as:
- most health, medical, and dental services performed by licensed physicians or dentists for medical reasons
- childcare services (daycare services for less than 24 hours a day) for children 14 years old and younger
- educational services such as:
- courses from a vocational school that leads to a certificate or a diploma to practice a trade or a vocation, or
- tutoring services for an individual who takes a course approved for credit by a school authority or the service follows a curriculum designated by a school authority
- music lessons
- arranging for and issuing insurance policies by insurance companies, agents, and brokers
Did You Know?
Typically the sales tax you bill depends on the billing address of your customer, not you. That means if your customer lives in BC, you charge 5% GST and 7% PST (if applicable). But if your customer lives in Nova Scotia, you’d charge 15% HST on your invoice. And if your customer lives in Seattle, you’d charge no Canadian sales tax.
How to register for GST
Register directly with CRA for a GST/HST account. Another convenient option is BC Registry Services, where you can do most business registrations and transactions all in one place.
For more information, including a full list of GST/HST exemptions, read Learning the Basics of the GST/HST, published by the Canada Revenue Agency.
If in doubt, ask your professional accountant. He or she can help you navigate the ins and outs of GST/HST and PST accounts.
Coming up next. Three methods of calculating GST, and how they can affect your taxes payable.
Brett Pavan, CPA, CGA, is a partner with Loren Nancke. Brett’s practice is focused on personal and corporate tax services for incorporated professionals and small business … and helping the team learn and grow in their professional development.