Webinar: GST/HST What you need to know if you sell taxable goods and services
Hello and welcome to our webinar on the goods and services tax / harmonized sales tax. We commonly know it as the GST/HST.
My name is Monique and I am your presenter today.
Today’s webinar will be recorded and posted later on canada.ca/cra-videos.
If you have questions on other tax-related matters, call the Canada Revenue Agency’s business enquiries line at 1-800-959-5525. You can also go to canada.ca/cra-videos where you’ll find all our business webinars. They can help you with different aspects of GST/HST and other topics.
This webinar is for you if you operate a business or are self-employed and you charge your customers GST/HST. Most businesses that sell taxable services or products in Canada must register for a GST/HST account and charge the GST/HST. There are some exceptions, which we will explain soon.
In this webinar, we’ll try to take the confusion out of the GST/HST process. We will talk about:
- GST/HST Registration
- exempt goods and services
- the GST/HST provincial and territorial rates table
- information your customers need
- filing your GST/HST return
- closing your account
- and we will answer your questions
If your business makes taxable sales, leases or other supplies or provides services in Canada, you must register for a GST/HST account, except in the following two cases:
- You are a small supplier, which means you make $30,000 or less in taxable sales in one calendar year. However, if you are a self-employed taxi driver or ride-share driver, you do have to register for the GST/HST even if your sales are $30,000 or less.
- Your only taxable supplies are sales of real property that are not part of conducting a business. For example, if you sell your car to your brother, but you are not in the business of selling cars, you do not have to register for a GST/HST account.
If you sell only goods or services that are exempt from GST/HST, you cannot register for a GST/HST account.
If you carry out a commercial activity in Canada and are not required to register for the GST/HST, you may choose to register voluntarily for a variety of reasons. Here are three:
- you want to claim input tax credits to recover the GST/HST you paid or owe on your business purchases
- your clients prefer to do business with companies that are registered for the GST/HST
- you are starting your business activities and want to register before your total worldwide sales of taxable goods and services exceed $30,000
If you register voluntarily you will have to charge, collect and remit GST/HST on your sales of all taxable goods and services from your date of registration moving forward.
You will also have to file GST/HST returns on a regular basis. If you are a sole proprietor or partnership and you don’t file your GST/HST return on time, the CRA will withhold your personal income tax refund until you file all your returns.
Once you are registered, you will also have to stay registered for at least one year before you can cancel your registration or close your account, unless you stop your commercial activities.
A common misconception is that you don’t have to collect GST/HST if your sales are below $30,000.This is true only if you have not registered for the GST/HST. Once you register, every dollar of taxable sales by any businesses you hold is subject to the GST/HST.
If you are a sole proprietor, partnership or corporation, you must include on your return the total of all sales, before expenses, from the worldwide taxable supplies of your business. If you were associated at the beginning of the year you are filing for, you also have to include the worldwide taxable supplies of all your associates.
When you calculate the total taxable supplies of your business, do not include revenues from supplies of financial services, sales of capital property, or goodwill from selling a business.
For more information on voluntary registration, like who should register and how and when to register, go to canada.ca/gst-hst. From there you can also access the GST/HST Memoranda Series 2-3, Voluntary Registration, by searching “GST/HST Memoranda Series” in the Search CRA field.
Some goods and services are exempt. That means no GST/HST applies to them and you do not charge the GST/HST on them.
Some examples include long-term rentals of residential accommodation and residential condo fees; most health, medical and dental services; child care; music lessons; and most services provided by financial institutions. For a full list of exempt supplies, see Guide RC4022, General Information for GST/HST Registrants, at canada.ca/cra-forms-publications.
As a registrant, you can recover the GST/HST you paid or have to pay on your business purchases and expenses. You do this by claiming an input tax credit, also known as an ITC. You may be able to claim ITCs if your purchases and expenses are for things you consume, use or supply in your commercial activities.
You cannot claim the GST/HST you paid, or the ITCs, for exempt sales. If your revenue includes sales of taxable and exempt goods, you can claim the ITCs only on the portion of the purchase that relates to the taxable sales.
As you can see in this chart, different rates of GST/HST apply across the country. When charging your customers GST or HST, follow the rates for the province or territory that the goods or services are provided in. Also note the date each of the rates became effective.
Next, we’re going to review the information you have to provide to your customers. As a GST/HST registrant, you have to include specific information on documents such as invoices, receipts and contracts when you make a taxable sale of goods or services. Your customers will need this information to claim their input tax credits.
The chart on the next slide shows what to include on your receipts and invoices to support a claim.
The information you have to include on these documents is based on the value of the transaction. This chart shows you what to include when. Let’s walk through it.
On the left side you see a list of all the information that you might need to include on your sales receipts and invoices. To the right, you see three columns. Each shows a different price range and which item needs to be included at each price range.
You’ll notice that smaller sales, under $30 per invoice, only require the supplier’s name, the date and the amount paid.
For sales between $30 and $150, you have to include a little more information, such as the amount of GST/HST applicable, which rate applies to which item, and the supplier’s business number.
For sales over $150, you have to include trade names, a description of the goods or services and the payment terms.
Basically, the higher the dollar value of the sale, the more information you have to provide.
If someone wants to claim input tax credits, they need an invoice that includes GST/HST information, so make sure you fill out the invoice correctly.
Let’s look at filing your GST/HST return. You can file your return electronically in any of the following ways: via My Business Account, GST/HSTNETFILE, GST/HST Internet File Transfer or by telephone using GST/HST TELEFILE.
You can also file in person or online at a participating financial institution or by mail to the address on the return.
You have to file online if you have more than $1.5 million in annual taxable sales or if you are required to recapture input tax credits.
Your filing deadline and payment due date depend on your GST/HST filing period, which in turn depends on your total worldwide sales. Let’s break it down.
If your sales are less than $1.5 million, you can choose to file annually, quarterly or monthly. If you choose to file annually, the filing and payment deadline is three months after your fiscal year-end.
The only time this is not the case is if you have business income for income tax purposes and follow a December 31 fiscal year-end. In that case, your filing deadline is June 15, although your payment deadline is still April 30.
If your sales are between $1.5 million and $6 million, you can choose to file quarterly or monthly. Whether you choose to file quarterly or monthly, your filing and payment deadline is one month after the end of the filing period.
If your sales are more that $6 million, you must file your GST/HST return monthly. Just like with any monthly filing period, the monthly filing and payment deadline is one month after the end of the filing period.
Now let’s discuss deregistering or closing your GST/HST account. You might have to close it if you are closing your business or downsizing to become a small supplier.
You must have been a GST/HST registrant for at least one full year before the CRA will close your account, unless your business is closing completely and ceasing operations.
Here’s what you need to know about your tax obligations.
You cannot close your GST/HST account online. You have to do one of the following:
- call our Business Enquiries line at 1-800-959-5525, or
- fill out Form RC145, Request to Close Business Number Program Accounts, and send it to the CRA by mail or fax
You can find this form at canada.ca/gst-hst.
Before you close your account, have the following information ready.
- your business number
- the legal name of the business
- the cancellation date
- the reason for closing the account
The following are common reasons for closing a GST/HST account:
- you are closing your business
- you are selling your business
- you are a small supplier with annual sales of $30,000 or less
- you are public service body that is a small supplier with annual sales of $50,000 or less
- you are no longer making any taxable supplies
- you are filing for bankruptcy
- you are in receivership
- you are merging or amalgamating with another business
- the sole proprietor of the business has died
- you registered for a GST/HST account in error
When you close your account, you have to figure out what you owe in GST/HST on non-capital properties that you hold at the time of closing. A non-capital property is what you use or sell in your commercial activity. You are considered to have sold each property (things like supplies, raw material or inventory) that you held and to have collected GST/HST on these sales. As a result, the CRA will recapture the input tax credits that you previously claimed on this property
You are considered to have sold your property at the fair market value immediately before you closed your account. The fair market value is the price the property would sell for on the open market. You therefore have to pay the GST/HST on the fair market value on your final return.
You also have to calculate the GST/HST owing on the capital property that your business owns when you deregister or close your business. This includes things like land, buildings, vehicles and computers. You are considered to have sold the capital property that you used in your business immediately before you closed your GST/HST account and collected GST/HST on these sales. When you close your account, you have to pay GST/HST on the value of the capital property that the business owns.
The rules used to calculate tax owing of certain capital property, like furniture and equipment, are called the change-in-use rules. Use them to figure out if you owe any tax for this property. You can find the rules in Guide RC4022, General Information for GST/HST Registrants, at canada.ca/cra-forms-publications.
When you close your account, file your final GST/HST return and pay any amount owing. You are considered to have two separate reporting periods once you close your account. This is because you might continue to receive revenue that you earned before closing your account. Because of this, you might have to file two returns. The first return is for the reporting period that ends the day before you close your GST/HST account. The second return is for the reporting period that begins the day you closed your GST/HST account and ends on the last day of the month. Only file the second return if you have tax to remit for that period.
We have now reached the end of our webinar. Thank you for joining me today. I hope that the topics we covered will help you meet your GST/HST obligations.
Thank you for watching and stay tuned for more webinars in the coming months!
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