Starting a business involves planning, gathering legal documents and making key financial decisions. Amongst these financial considerations, you will want to establish whether or not you will want to register for HST. The Harmonized Sales Tax (HST) replaced the existing provincial sales taxes and the federal goods and service tax in Ontario on July 1st, 2010. HST is applied at a rate of 13%, consisting of the 5% federal portion and an 8% provincial portion. In order to charge sales tax on your product or service, you will need to register for HST.
Legally, businesses that have $30,000 or less in annual worldwide taxable sales are not required to register and collect tax. You can, however, register voluntarily. You may wish to consider doing so for several reasons. First, by registering for HST you will be able to recover all outgoing business expenses. The HST paid when purchasing materials, equipment or supplies for your business can be recovered. Without registering for HST, you also run the risk of jeopardizing the trust of your repeat clients who won’t appreciate the jolt in pricing when you hit the $30,000 mark. Your clients may also only trust to work with businesses that are already registered for HST for formality reasons.
If you decide to register for HST voluntarily, remember that you must charge, collect and remit HST on your sales or taxable goods and services.
You will have to register for HST when you no longer qualify as a small supplier because your total worldwide taxable supplies of goods and services exceed the small supplier limit of $30,000 in a year. If you choose not to register immediately for HST, always track the amount of sales you will be generating. You will be responsible for any additional sales exceeding $30,000 annually. Legally while it is technically the responsibility of your clients to pay out the additional HST costs, the likelihood of them agreeing to pay the outstanding costs will be slim. You may also sacrifice their trust in your business.
You can register for HST by the following methods:
- Internet: cra-arc.gc.ca
- Telephone : 1-800-959-5525
To register for HST you will need a Business Number, which can be collected at the same time at Canada Revenue Agency. Once registered, the Canada Revenue Agency will send you a letter confirming your BN, the accounts registered and a summer of the information you have provided.
For HST and Payroll general inquiries, call Revenue Canada’s Tax Services Office at 1-800-959-5525.