Here’s What No One Tells You About HST
We’ve all experienced HST – it’s that lovely surprise added on to every expense you occur. And when you become an entrepreneur all of a sudden you get a “choice” of whether or not you want to charge HST – sort of. If you read the CRA website (because… that’s what you do for fun right?) you see this magical $30,000 number and close the browser thinking you’ll deal with HST when you hit that $30,000 in sales. Here’s some HST facts you may not be aware of
- Yes it is true that you do not have to charge HST if your sales are less than $30,000. As soon as your first sale over $30,000 you have 29 days to register for an HST account.
- Registering a business number is not the same thing as registering for HST; you have to associate your business number with the HST program account on the CRA website. Your business number will then have a RT 0001 at the end i.e. 123456789 RT0001.
- You MUST show your HST number on your invoices “123456789 RT0001” otherwise your customer can refuse to pay you the HST you’re charging.
- Once you start to charge HST you can claim your Input Tax Credits (ITC =the HST you pay on your expenses) and offset them on your HST Remittance. For example, if you collect $100 in HST, and spend $125 on your expenses via ITC then you will actually get a $25 REFUND for that period.
- If you have recurring customers it’s often a good idea to just register and charge HST from the get-go so there is no perceived price hike once you reach the $30,000 mark.
Tip: Keep your HST in a separate bank account so you’re not tempted to spend it; many entrepreneurs will be in refund positions the first few months/years as they grow their business and they get used to getting refunds. It can then be a shock the first time they have to PAY HST. By keeping it in a separate bank account you avoid such surprises.
Caution: If you are an annual filer and your net tax for a fiscal year is $3,000 or more, you may have to make quarterly instalment payments throughout the following fiscal year. The only way to keep on this is to keep your bookkeeping up-to-date and track this.
“Behind Every Great Business is a Great Accountant”
Shalini Dharna, CPA, CA, LPA, has over 10 years of experience in accounting and finance. Shalini’s background experience in financial statement preparation and analysis, combined with her experience in accounting and tax, offers an excellent combination that provides businesses with solutions and strategies that maximizes operational efficiencies while supporting growth and profits. Her goal is to help businesses and individuals succeed in achieving their financial dreams.
For more information on how to keep your business tax efficient, how to set up a proper accounting foundation, or to get a consultation on whether you are making all the right tax choices for your business, contact Dharna CPA. www.dharnacpa.ca. [email protected]
