If you charge customers goods or services in Canada, you need to know about the goods and services tax (GST) and the harmonized sales tax (HST). Your business pays these taxes to your provincial government. If your business offers taxable supplies and makes more than $30,000 in a calendar year, the Canada Revenue Agency requires you to create an online account to pay the GST and HST.
Deciding if You Should Voluntarily Sign Up for a GST/HST Account
You can voluntarily sign up for a GST/HST account. But first, take the following steps to determine if you should register for a GST/HST account:
- Find out if your company is exempt from paying the GST/HST. Even if you’re exempt because your sales don’t meet the minimum threshold, you can still sign up for a GST/HST account.
- Decide if you’re going to charge GST/HST. If you choose to charge GST/HST, you should register for a GST/HST account. The reason you want to charge the GST/HST is so you can claim deductions on purchases you make for your business. If you don’t charge the GST/HST, you can’t utilize this benefit.
- Calculate the amount of input tax credit (ITC) you can claim from the GST/HST you paid on your purchases. The input tax credit can lower your tax bill when paying GST/HST.
- If the amount of ITC is worth the effort of filing your GST/HST return on a regular basis, you should register for a GST/HST account.
Benefits of Opening a GST/HST Account
One of the main benefits of signing up for a GST/HST account revolves around the payment process. With an account, you pay your GST/HST returns electronically.
Also, creating a GST/HST account helps you plan your business’s future. If you anticipate your business breaking the $30,000 per year barrier in the next few months, you might sign up for an account to get used to this new way of doing business. You must also charge the GST/HST for transactions of $30 or more, and having a GST/HST account makes remitting those taxes easier.
When you start to charge the GST/HST, don’t forget to include the tax amounts on your invoices, as required by Canadian law. In addition to custom invoices, QuickBooks can manage your tax payments for the GST/HST. QuickBooks Online can help you maximize your tax deductions. Keep more of what you earn today.