As mentioned last week, HST stands for Harmonized Sales Tax. In Ontario, it is a 13% tax that applies to all goods and services. As a vendor, you may be required to charge HST to your customers and then pass the money* on to the government. Let’s continue that talk, but with a few more details, and attempted explanations.
*Vocab word of the day: Remit
1. To lay aside partly or wholly
2. To send money (as in payment)
For example, assume you are registered for HST. If you invoice a client for $100 you would need to add 13% (in this case $13) for tax, so the total would become $113. You would keep the $100, and remit the $13 to the government.
How Often Do You Have To Remit the Tax You Collect?
You can remit monthly, quarterly (every three months), or annually. Though you may have a choice, usually when you register to collect HST you are assigned a remitting period.
Who Has to Register for HST?
If your total revenue (before expenses) is $30,000 or less, you are considered a small supplier and are not required to register to collect and remit HST. However, you can register voluntarily. If you earn above $30,000 you are required to register.
Why Would Someone Volunteer To Charge Taxes?
Business that charge HST are eligible for Input Tax Credits (ITCs). As a GST/HST registrant, you may recover the GST/HST you paid on purchases and expenses related to your business. To go back to the example above, you owe $13 in HST. But you also bought $46 dollars of office supplies, that tax on which is $6. You can claim the $6 as a tax credit, so only remit $7 in HST. Claiming ITCs is a huge benefit of charging HST.
How Does Someone Register to Collect HST?
The first step is to register for a Business Number with the Canada Revenue Agency. Once you have your Business Number, you can register your HST account. (Click here for more information). You will need to know the date of your fiscal year-end. (ie, One year from your business start date. So if you started business on April 1st, your fiscal year end would be March 31st). Within a few weeks of registering, you should receive a package with information about how frequently you need to remit the HST you collect, and the necessary papers to do so.
How Do You Remit the HST You Collect?
A few weeks before your remittance is due, you will receive documents to file your return. Basically, you enter the income you earned in the reporting period, and the HST you collected. Then you subtract the value of any Input Tax Credits. If the number is positive, you owe HST, if the number is negative (ie you claimed more tax credit than you collected), your account is credited. You can pay the return online, or take the forms into your bank and have a teller make a payment from your account. (You just tell them you need to pay your HST; they know what to do).
Is that enough for now? Brain overload? Ok.
Please note that neither I, nor Knock Twice, claim to have any financial expertise. I’ve learned from other photographers, and trial and error. This is intended as a primer only, and you should use official sources if you’re looking into registering your business.
If you’re located in Quebec, visit the Revenue Quebec website: www.revenuquebec.ca
And for more information about registering for a Business Numbers and GST/HST, visit the Canada Revenue Agency website: www.cra-arc.gc.ca