How to Register for a Canadian HST Number
Some people panic at the thought of having to register for an HST number if they are a sole proprietor, independent contractor, or business owner with fewer than 10 employees.
In time, any freelancer, self-employed person, sole proprietor, or small business owner will likely find themselves wondering how to obtain an HST number. Despite the concerns of some, HST collection and payment is beneficial. The more tax you pay, the more money you make.
However, I do understand why some people fear acquiring an HST/GST number because of the additional paperwork that will be required of you come tax time. Moreover, the timing of when you must apply for an HST number is not universally understood. The steps to registering for a HST number are outlined below.
To what does an HST number refer
Freelancers, self-employed people, and small business owners need a unique HST (Harmonized Sales Tax) identification number before they can begin collecting HST from their clients. You can't start collecting HST from customers even if you're eligible to do so because you can't do so without first receiving your HST number.
Ontario, New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island residents are all subject to HST. A GST (Goods and Services Tax) number is required if you live in Alberta, British Columbia, Manitoba, Northwest Territories, Nunavut, Saskatchewan, Yukon, or Quebec. On the other hand, if you are a resident of Quebec, you are obligated to submit a QST application. A provincial sales tax (PST) number may also be required in some provinces.
If and when you should get a GST/HST number
Since the language on the government website isn't exactly straightforward, many people struggle to understand when they need to register for an HST number. To put it simply, if your annual earnings from freelancing, self-employment, or a small business are more than $30,000, you must register for a GST/HST number within 29 days.
That $30,000 cap applies ONLY to your side gig earnings and NOT to the salary you pull in from your day job. A GST/HST number can also be applied for voluntarily at any time.
After obtaining your GST/HST number, it is mandatory that you include this tax in all future invoices. In theory, you should also begin charging taxes on the item that pushes your annual revenue over $30,000, though you cannot begin charging taxes without a valid GST or HST number. The general rule (and I'm no accountant) is that once you hit the $30,000 mark, you should get a GST/HST number and begin charging taxes.
There is one exception to the general rule that you can wait to apply for a GST/HST number. For the purposes of Goods and Services Tax and Harmonized Sales Tax, any company that provides a transportation service (such as Uber, Lyft, or limousine services) is considered a taxi company. Before you can start offering tax preparation services, you must first register with the CRA. Taxes on goods and services are already factored into ticket prices.
Taxi and other ride-hailing services must register for GST/HST, but delivery services like Uber Eats are exempt. However, if your annual gross sales are more than $30,000, you must obtain a GST/HST number and include it in your ridesharing delivery account.
Tutorial on Obtaining a HST Number
So, you're interested in acquiring an HST number. Although registering for an HST number is a simple process, you will need a few items in order to complete the application.
- You'll need to give us the basics, like your name, birthday, SSN, home postal code, company name, phone number, and address.
- Assuming you make more than $30,000 per year, you'll need to register as of the year in which your income reaches $30,000 or more. Still, cabbies would advertise their service launch date. People who voluntarily sign up would enter the date they asked to register.
- To determine their GST/HST fiscal year, the vast majority of taxpayers will look to the previous calendar year's return. When you file your taxes in 2021, for instance, it is likely that you will also file for HST in that year.
- Revenue for the entire year - The Canada Revenue Agency (CRA) requests that you estimate your yearly revenue. You can relax knowing that this won't have any bearing on how you file your taxes in the future even if it's not 100% accurate.
There is no way to save your progress through the registration process, so you'll need to do it all in one sitting. If you haven't done anything in 30 minutes, you'll be logged out as well. The entire application process should take no more than a few minutes of your time.
You can get an HST number by registering in one of the following ways:
Applying for a GST/HST number requires a valid business number. If you don't already have one, don't fret; one will be made for you at the same time you apply for a GST/HST number. Your GST/HST account number and confirmation will be sent immediately, allowing you to begin collecting taxes without delay.
It is necessary to contact Revenu Québec if you are a Quebec resident. You can visit their website or call them at 1 to obtain a tax identification number. 800 567 4692
Follow these steps once you have received your GST/HST number:
Obtaining an HST number will allow you to charge tax to your Canadian clients. The cost to Canadian companies will vary depending on the province in which they are based. The current tax rates in Canada are as follows:
- Alberta, BC, MB, NWT, NU, QC, SK, and YT all have a 5% Goods and Services Tax.
- 13 Percentage (HST) - Ontario
- Provinces of New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island add 15% (HST) to the total.
If you're a freelancer in Toronto, but your client is in Calgary, this could be a problem. For the services you render, you would charge a flat rate of 5%. Include your GST/HST number on your invoice, as many customers will ask for it. Clients should not be made to feel uncomfortable because taxes are being charged. As their tax revenue is equal to their tax expenditures, they will not be adversely affected.
Regardless of the nature of your business or the nature of your commercial activities, all of your dealings with clients located outside of Canada (non-residents) are taxed at a zero rate. To the extent that you don't impose any tax on them This income must still be reported. It's as simple as not collecting taxes from them. At tax time, you'll divide your earnings between "domestic" and "international" categories. The CRA would know there is no tax liability because you are disclosing all of your income, regardless of where it was earned. You are required to apply for an HST number once your annual income reaches $30,000, even if all of your money comes from outside of Canada and you will never be obligated to collect or remit HST.
The Use of the GST/HST Funds
Remember to set aside any GST/HST revenue you receive as soon as possible, as it will be refunded to you at a later date. If you're looking for a high-interest savings account in Canada, I suggest checking out EQ Bank. For the time being, you may as well earn some interest.
You should maintain accurate records of all GST/HST that you have collected and remitted. What method you use is entirely up to you. A few people will use software to do their work, while the rest will use a spreadsheet to do everything manually. You should keep track of any international clients who are zero-rated for tax purposes, as this information will be used in your tax return. Keep this paperwork for at least six years in case the CRA conducts an audit.
Your GST/HST return will be filed simultaneously with your tax return. If you have more GST/HST receipts than GST/HST payments, you owe the CRA GST/HST. Input tax credits are what you get in this case. If your debt is less than $3,000, you should simply make the payment by the due date. The CRA will require quarterly payments if your debt is greater than $3,000, though. Both remittance vouchers and electronic payments through your CRA My Business account can be used to remit GST/HST.
Concluding Ideas
Learn how to get your HST number in a matter of minutes. When you're officially set up, it's time to get your accounting in order so that tax time is a breeze. Get on a routine that helps you and don't deviate from it. Check out my comprehensive guide on freelancing in Canada if you want to learn more about taxes.
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