What You Need to Know About Obtaining a Canadian HST Number
Some people panic at the thought of having to register for an HST number, but if you're self-employed, a sole proprietor, or run a small business, you'll need one sooner or later.
One day, if you're self-employed, a sole proprietor, or run a small business, you might find yourself wondering how to apply for a Harmonized Sales Tax (HST) number. A lot of folks get worked up about having to collect and remit HST, but it's actually for the better. More tax revenue indicates greater financial success.
Nonetheless, I can appreciate the trepidation that surrounds obtaining an HST/GST number because of the additional documentation that it necessitates come tax time. In addition, the circumstances under which an HST number registration is mandatory are not always obvious. How to apply for a HST number and what that number entails is outlined below.
How do you get an HST number?
In order to begin collecting Harmonized Sales Tax (HST) as a contractor, sole proprietor, or business owner, you must first obtain a unique HST identification number. You can't start collecting HST from customers even if you're eligible to do so because you won't have your HST number until you formally apply for it.
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, the Northwest Territories, Nunavut, Saskatchewan, Yukon, or Quebec. But if you're a local of Quebec, you'll also need to fill out an application for QST. Furthermore, obtaining a provincial sales tax (PST) number may be necessary in some provinces.
When Should You Get Your GST/HST Number?
It's not always clear when you need to apply for an HST number, and the government website doesn't help matters. You are required to register for a GST/HST number within 29 days of earning $30,000 or more in freelance, self-employment, or small business income in a calendar year.
The $30,000 cap applies exclusively to your side gig earnings and NOT to your regular job salary. On the other hand, you are free to apply for a GST/HST number whenever you see fit.
Obtaining a GST/HST number obligates you to include the applicable tax on all future invoices. You'll need a GST or HST number before you can begin charging taxes on the item that pushes your annual revenue over $30,000. If I were a business owner (and I'm not), I'd get a GST/HST number and start charging taxes the moment I hit the $30,000 mark.
There's one time when getting a GST/HST number on the spot is a necessity. For the purposes of GST/HST, any company that provides passenger transportation services (such as Uber, Lyft, or limousine services) is classified as a taxi company. Before you can start offering tax preparation services, you must first register with the CRA. You shouldn't have to worry too much about GST/HST, as it is already accounted for in the ticket prices.
Unlike Uber Eats deliveries, which are not subject to the mandatory GST/HST registration for ride-sharing services, However, once your annual revenue reaches $30,000, you'll need to apply for a GST/HST number and include it in your rideshare delivery account.
Instructions for Applying for a HST Number
So, you're interested in acquiring a HST number. Although registering for an HST number is a simple process, you will need a few items in order to complete the application.
- Your name, birth date, SSN, home postal code, company name, SSN, mailing address, and other identifying information will be required.
- The beginning of the registration period is typically the date that your annual income exceeds $30,000. Still, cabbies would advertise their service launch date. Date of request would be used for those who voluntarily sign up.
- For GST/HST purposes, most taxpayers will use the previous calendar year's January to December period as their fiscal year. If you're filing your taxes in 2021 and registering for HST at the same time, for instance, it's likely that both years will refer to the same tax year.
- Income for the entire year - The Canada Revenue Agency (CRA) requests that you estimate your annual income. If this isn't 100% accurate, it won't affect your taxes in any way.
During registration, your data will not be saved, so please make sure you only need to do it once. The 30 minutes of inactivity will also result in your being kicked out. The whole application process should take no more than a few minutes of your time.
One of the following is how you can apply for an HST number:
In order to apply for a GST/HST number, you must first have a valid business number. If you don't already have one, you won't have to worry about getting one after registering for a GST/HST number. Get your GST/HST account number and confirmation email immediately so you can begin collecting taxes on your sales right away.
You must contact Revenu Québec if you live in Quebec. You can visit their website or call them at 1 to request a tax identification number. 800 567 4692
Next Steps Once You Have Your GST/HST Number
Obtaining an HST number will allow you to charge tax to your Canadian clients. What you charge will vary depending on the province in which the Canadian companies are based. These are the current tax rates in Canada:
- Alberta, British Columbia, Manitoba, Northwest Territories, Nunavut, Quebec, Saskatchewan, and Yukon all have a 5% goods and services tax (GST).
- One Thirteen Percent (HST) - Ontario
- Prices in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island are subject to a provincial sales tax of 15% (HST).
So, you're a freelancer in Toronto, but your client is in Calgary. For your services, you'd charge them 5%. Always include your GST/HST number on invoices, as many customers will need it to pay you. Don't feel bad about imposing taxes on your customers. It won't make a difference to them financially because the taxes they pay will cancel out the ones they receive.
Regardless of the nature of your business or the nature of your commercial activities, any dealings with clients located outside of Canada (non-residents) are considered tax-free. Which means you don't impose any sort of tax on them. A tax return is still required. You simply don't tack on any sales tax. There will be a split between domestic and foreign earnings when tax time rolls around. Because you'd be disclosing your worldwide earnings, the CRA would know that you owe no taxes. If you make more than $30,000 but will never charge HST because all of your income comes from outside of Canada, you still need to register for an HST number.
A Question of Use for the Collected GST/HST
Remember to set aside any GST/HST money you receive as soon as possible, as it will be repaid to the government at a later date. If you're looking for a high-interest savings account in Canada, I suggest checking out EQ Bank. In the meantime, you might as well earn some interest.
You should also maintain accurate records of the GST/HST that you have collected and remitted. You can approach this however you like. Some people will use software, while others will use a spreadsheet to do the work manually. You should make a note of any international clients who are zero-rated for tax purposes if they are included in your tax return. In case you get audited by the CRA, keep these documents for a minimum of six years.
Tax returns (both GST and HST) are filed at the same time each year. In a nutshell, you owe the Canada Revenue Agency GST/HST if you've collected more than you've paid. These are referred to as "input tax credits." Assuming your debt is less than $3,000, you should simply make the payment by the due date. However, the CRA will require quarterly payments if your debt is greater than $3,000. You may submit your GST/HST payment either through your bank (with a remittance voucher) or the CRA's My Business account website.
Getting an HST number is simple and only takes a few minutes of your time. After you've officially signed up, it's time to get your accounting in order so that tax time is a breeze. Establish a routine that serves you well and stick to it. Check out my comprehensive guide on freelancing in Canada if you want to learn more about taxes.
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