Who does this apply to?
This applies to the Canadian business owners, corporate and self-employed, who want to understand what their HST registration requirements are.
Who does this not apply to?
We’re not talking about taxi operators, Uber/Lyft drivers, AirBnB operators, charities, or other public service bodies. These have similar but different rules, and if this is you, please talk to your tax professional.
What do I do first?
Determine if you’re providing taxable supplies, which is the technical way of saying what you’re selling is subject to HST. And unless there is a specific exemption, you are. Broadly speaking, if you’re in healthcare, provide childcare or residential rental services, you don’t need to register. You can find a more detailed list of taxable supplies, zero-rated supplies (you don’t collect HST, but can claim the HST paid) and exempt services.
I couldn’t find an exemption. I guess I have to register.
You can choose to register if you make less than $30,000 in any 4 consecutive quarters. In this case, you’re a small supplier and don’t have to collect HST. But you can’t claim any HST paid on your expenses, and in the first year, this can be significant if you’re buying some computers, software, and other start up costs.
I bought all that stuff already. I can still register and claim the HST I paid right?
No, but we’ll talk about that more in a future installment.
I have a personal side gig where I make about $10,000. How does that factor in?
If you’re earning $10,000 there, and $20,001 in the new corporation that you control, you need to register both businesses for separate HST accounts as they are associated. And if you were already registered as a sole-proprietor, you can’t deregister your account personally.
Alright. Let’s get registered.
Hold up, as Columbo would quip, “just one more thing, sir.”
When the corporation registers for HST, you’re also signing up for “directors’ liability”. So, if the corporation fails to file and pay, the CRA will consider the directors of the corporation to be jointly and severally liable for the failure to file the returns and the balance owing. So, if you added your spouse as a director, that would include them, and directors’ liability extends for at least two years after the director properly resigns.
Even more importantly, HST is considered a trust account, so the CRA will move incredibly fast to collect amounts owing. If you’re late-filing, you need to have a plan to pay.
But you’re here now, and we’ll be able to plan your filings and budget your payments.
Standard Disclaimer: This is intended to be a guide and not binding tax advice. If you need that, call me.