Today we're continuing our 3 part series on whether or not you need to register for GST/HST.
If you missed part 1, you can find it here:
What are the CRA's rules about what you are selling?
I’m going to try to drill down to the essence to make it more understandable for the everyday person who may not enjoy trying to understand the technical phrasing used by the CRA. I get that tax rules aren’t the most fun thing out there to read. I’ve tried to take the technical and make it more understandable. Bear with me here, if you can stick it out to the end, you should have a pretty good idea of where you stand with GST or HST if you are just starting a business.
Ask yourself this: Are you trying to sell a product? Or, if you are selling a service, is there a reasonable expectation that you are trying to make money?
If the answer to either question is yes, and you aren’t selling “Exempt Supplies” (things the CRA doesn’t require tax to be charged on) then you have passed the first requirement of needing to register. But you have to meet both requirements before you have to register.
Want to see a list of those Exempt Supplies? Check out this link pulling you to the list produced by the CRA:
The list of Exempt Supplies includes things like:
Residential rent of more than one month,
Selling the home you last lived in,
Most health, medical, or dental services,
Music lessons, and
If you are only selling Exempt Supplies, you should not register for GST /HST. Actually, I don't even think the CRA would permit you to if you wanted.
Now if you are looking at the list of Exempt Supplies, you will notice that there are some things we don’t pay 13% HST on that aren’t on that list. What’s up with that?
Farming income, some medical devices, and most exported goods/services are not included in the list but you don't pay GST/HST for those items. That’s because technically they aren’t exempt, they are zero-rated. Which surprisingly is a big difference. It means they are a taxable good, but that the rate of tax is 0%.
If you are selling a zero-rated good/service, this allows you to not collect HST from whomever you are selling to, but you still get to claim back the HST you paid on expenses related to the creation of that income if you are registered. Cool, right!?!
So, little or not, in that case, many people choose to register because you’re going to get money back on a regular basis when you file your HST. But it does mean you have to do the tracking and the filing for. With the automation that is starting to happen in FinTech (Financial Technology), this isn't as much of a burden as it once was.
If you are interested in a more complete list you can check out the list of Zero-rated Supplies from the CRA here:
If the product or service you are offering isn't on the Exempt Supply list, and it is a product or service being sold through your business activities, you need to find out if the CRA thinks you are a small supplier or not to know if you must register for GST/HST. If you wish to register, you can. That's what we will be covering in part 3 of this series.
Don't forget, as with anything else you can google on the internet, these are general guidelines, not specific to your unique situation or business. Sales tax can be complicated. If you are thinking of starting a business this is a good time to get your A team lined up (accountant, bookkeeper, and lawyer), and talk with someone about your specific situation.
What are my sources? Outside of the links provided directly in the post, I also used these documents from the CRA to guide my wording: