Episode 2: When do I need to charge GST?
When you just start your business its easy for things like making sales, managing customers and day-to-day operations to take priority over the more financial aspects. One aspect every business owner needs to consider at one stage or another is registering for sales tax, that could mean GST/HST and/or PST. What is the difference between GST, HST & PST? GST or Goods and Service Tax is a sales tax which is revenue for the CRA. It was first introduced in the 90’s and it was introduced as revenue for the government. Its important to keep that in mind when you’re adding GST to your invoices and when you’re charging GST, it isn’t a price increase for you because it isn’t revenue. Its more reflective of a cost of doing business. GST was initially introduced Canada wide, and applicable on taxable goods and services. PST or Provincial Sales Tax was introduced later and was introduced by the individual provinces. If you are in Manitoba, it is called RST for example. HST or Harmonised Sales Tax was introduced in 1997, it was intended as an approach to combine the federal GST and provincial PST rates to have a more simplified system. However not all provinces opted in for the HST and so today we are still left with the three different taxes. Depending on where you are located and your products & services your business may need to charge HST/GST or a combination of GST & PST. Its important to remember that HST/GST are used interchangeably. These taxes are implemented by the same agency the CRA. Provincial taxes on the other hand are implemented by the individual provinces. How do I know what rate to charge GST / HST / PST ?
- Are you selling taxable goods or services?
- It protects you from potentially registering too late and facing fines or penalties.
- It avoids having to advise your customers to the change in thier invoice amount.
- It prevents you from putting a revenue bottleneck on yourself.
- You can take advantage of input tax credits.
- Notify your clients their next invoice will include GST.