Sales tax in Canada is an ongoing challenge for many entrepreneurs! The government doesn’t make it intuitive or easy. Did you know that the government is now requiring those of us with online businesses to start charging GST for our sales?
Have no fear as my claim to fame is making things like this EASY for my clients!
Let’s review some important points.
What to watch
- $30,000 gross revenue mark in worldwide income. If you have business in the United States or overseas, which is common for online Canadian entrepreneurs, it becomes even more challenging. For example, let's say you receive $10,000 in a given year from your Canadian clients, and receive over $20,000 from your clients in the United States or Europe, you still have to register for a GST number and file a return, because you've cracked that $30,000 threshold.
- Foreign exchange - meaning how you convert your USD sales into Canadian dollars for tax reporting. This is whole other kettle of fish!
- GST and HST depending on your province. Confused on how this applies to you?
How to Register for a GST Number
To open a GST/HST account, use one of the following ways on the Government of Canada website:
- using Business Registration Online
- using Form RC1, Request for a business number
- calling 1-800-959-5525 (be ready to answer questions from Form RC1, Request for a business number)
You will need the following information for your application:
- Your personal information: last name, social insurance number, date of birth, postal code
- Business information: name, address, number, type of business, name and social insurance numbers of all owners
How to Charge GST/HST
You must let your customers know when the GST/HST is being applied to their purchases. You can use cash register receipts, invoices, contracts, or post online to inform your customers whether the GST/HST is included in the price, or added separately.
You have to show both your GST/HST number and the GST/HST rate that applies (on your invoices) and either:
- that the total amount paid or payable includes the GST/HST
- the amount of the GST/HST payable separately from the amount paid or payable.
If HST applies, show the total HST rate. Do not show the federal and provincial parts of the HST separately.
Tracking now becomes imperative and it adds a whole other task to your long list of responsibilities as an entrepreneur. You will need to be more detailed in your tracking and may need a more sophisticated tracking system earlier than you had anticipated.
At the very least, a spreadsheet to track will get you started until you find the best tracking software or app that works best for you. You would list your sale, the GST, and the total after that. Then you can go down and add up your total sales, add up your total GST, and fill out a GST return. It's not going to save you in taxes, It's not going to save you in GST, but it will make you compliant with the government, which will help you sleep at night.
I can help! I’m certified with multiple expense tracking software and can take the time to sit with you and teach you how using software will simplify this process.
These are just a few of the top software/apps that you can use:
It’s not all bad of course...
Benefits of having to pay and track GST
- You can claim GST credits against what you pay
- Tracking your income is a great habit that will benefit your business in the long run as you grow
- Filing taxes at year-end becomes much easier and less costly for you