We see a lot of small business owners in Mississauga who wonder if they are required to charge HST in their business. As it turns out, although most businesses must charge HST and make the appropriate remittances to the CRA, there are exceptions that you may be able to take advantage of. If one of the exceptions described in this article applies to you, then your business will not be required to charge and remit HST to the government.
However, it's important to keep in mind that you can lose your right to take advantage of these exemptions if you register for an HST account. Every business that registers for an HST account with the CRA must collect HST from its customers or clients and make the proper remittances to the CRA, even if they otherwise qualified for an exemptions.
So it's important not to register for an HST account unless you're sure that none of the exemptions apply to you. Generally, you do not have to register if for an HST account if any of the following three situations applies to you:
you are a small supplier (that does not carry on a taxi business or commercial ride-sharing services);
your only commercial activity is the sale of real property, other than in the course of a business; or
you are a non-resident who does not carry on business in Canada.
You only provide "exempt services"
Let's spend a brief moment explaining the first bullet point and the last bullet point on the above list.
Your business made less than $30,000 in gross revenue
If your business made less than $30,000 in one year, then you will not be required to collect HST from your customers or clients, nor make any HST remittances to the government. On the other hand, if you find that you cross the $30,000 threshold in any point in the year, then you will be required to begin charging HST on any sales that take place after the most recent transaction that made you cross $30,000 in revenue.
You provide exempt supplies
Some types of supplies that you might be in the business of selling are legally exempt from the HST. That means that you do not need to charge HST on these types of supplies, but you are typically not allows to claim input tax credits expenses you incurred to provide these supplies. You also can't register for the HST if your business provides only exempt supplies.
The following are examples of exempt supplies:
a sale of housing that was last used by an individual as a place of residence;
long-term rentals of residential accommodation (of one month or more) and residential condominium fees;
most health, medical, and dental services performed by licensed physicians or dentists for medical reasons;
child care services, where the primary purpose is to provide care and supervision to children 14 years of age or under for periods of less than 24 hours per day;
most domestic ferry services;
legal aid services;
many educational services such as: courses supplied by a vocational school leading to a certificate or a diploma that certifies the ability of individuals to practice or perform a trade or a vocation; or tutoring services made to an individual in a course that follows a curriculum designated by a school authority;
most services provided by financial institutions such as lending money or operating deposit accounts;
the issuance of insurance policies by an insurer and the arranging for the issuance of insurance policies by insurance agents;
most property and services provided by charities and public institutions; and
certain property and services provided by governments, non-profit organizations, municipalities, and other public service bodies including municipal transit services and standard residential services such as water distribution.
If you live in the Greater Toronto Area and you have questions about tax, bookkeeping or managing money in your business, then feel free to meet with us for free by clicking here.