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 ?
  1. Are you selling taxable goods or services?
The first thing to keep in mind is the type of product or service that you are selling, each product is categorized differently under the federal system and the provincial system. Federally they will fall into either taxable supply, exempt supply or zero-rated supply. https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4022/general-information-gst-hst-registrants.html 2. Where is the place of supply? The second thing you need to determine is the place of supply. Most products and services are taxed based on your customers location. For example, if you are a selling a taxable supply and are located in BC with a customer in Ontario you will need to charge the Ontario rate of Sales Tax. When should I register for GST? There are a few things to take into consideration when you are considering registering for GST. Firstly, the CRA require you to register once your revenue surpasses 30k in worldwide sales. https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4022/general-information-gst-hst-registrants.html#H2_206 However there are many benefits to registering early including:
  • 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. 
How do I tell my customers I’m going to start charging GST? If you are registering for the first time and haven’t previously been charging GST the concept may feel a little overwhelming for you. See the below checklist to take you from newb to expert in no time.
  1. Notify your clients their next invoice will include GST.
While this step is not actually required, its a good idea to give your customers a heads up. Not sure on how to word it exactly? See sample client letter in my free GST toolkit. https://www.clearmarginconsulting.com/accessgsttoolkit/ 2. Add your GST number on to your invoices. 3. Add the correct GST rate and amount to each invoice. How do I track GST/HST collected and GST/HST paid? Investing in an accounting software is a great way to easily manage GST collected on invoices and the GST you pay on expenses. If you are not yet wanting to upgrade to an accounting software tracking charges in a excel spreadsheet is also a great way to ensure everything is recorded. Download my free GST tracking: https://www.clearmarginconsulting.com/accessgsttoolkit/ How do I pay the GST I owe? Your GST return will either be paid on a yearly, quarterly or monthly basis. To ensure you meet your filing deadline ensure you can access your CRA my business account and confirm your due date.  In terms of making the actual payment you need to complete a GST return which can be done online through your CRA my business account.  Payment can also be made online via direct debit or most banks also have an option to pay through your online banking. How can I find more information on PST? The best place to go for provincial specific sales tax is the individyal provincial sites, in BC further information can be found at https://www2.gov.bc.ca/gov/content/taxes/sales-taxes/pst. Sales tax can seem scary and overwelming at first, but after a little reasearch you will realise its no more complicated then your weekly starbucks order. Have more financial questions? Tune in weekly to Financial Conversations the podcast at www.financialconversations.com, Spotify or Apple Podcasts.