All business owners must be aware of HST filing obligations. Since most business owners have the same type of questions, here's an easy to follow Q&A that covers some of the main requirements:
Q: What is HST?
A: HST stands for Harmonized Sales Tax, a provincial and federal tax charged on goods and services.
Q: Who is required to charge HST?
A: Corporations, partnerships and sole proprietorship
Q: Is this a mandatory charge?
A: You can charge HST as soon as you start selling your goods / services (optional), however it is mandatory to charge HST once you hit $30,000 in sales over four consecutive quarters.
Example: Feb 2020 – April 2020 – total sales: $20,000
May 2020 – July 2020 – total sales: $10,000
Total: $30,000 – you must start charging HST in August 2020
Q: How do you calculate HST?
A: There are two options – quick method and regular method. Both have pros and cons and the quick method is not allowed for all businesses (read more here).
In a nutshell, the quick method allows you to file a lower percentage of HST collected (4.4-8.8%) and ignore HST paid on your business’ costs.
In the regular method, you would deduct the HST collected from HST paid. If the total is negative then you will submit this amount to the government, otherwise you will get a refund for it.
Q: How often are you required to file HST?
A: That depends on the size of your business (i.e.: annual sales).
- File annually if your business’ annual revenue is less than $1.5M
- File quarterly if your business’ annual revenue is between $1.5-6M
- File monthly if your business’ annual revenue is over $6M
Part II of this article will cover the topic of what to charge when selling outside of your province or country.
If you've read this article and still have questions, contact us here.