Area of Law: Tax Law
Answer # 198
Collecting and remitting HST and GSTRegion: Ontario Answer # 198
Collecting and remitting GST or HST allows a business to recover the GST or HST it pays on business expenses. In Ontario, businesses which register with Canada Revenue Agency, or which are eligible to register, can collect 13% HST from customers and recover the amount of HST they paid on business expenses.
Calculating how much GST or HST to remit
There are two main ways of calculating how much GST or HST to remit: the regular method and the quick method.
1. The regular method
The regular method (formerly called the general method) requires that you keep track of the GST and HST collected from each business transaction. Then, you add up the GST and HST you paid on allowable business expenses, called your input tax credits (ITCs), and subtract that amount from the total GST and HST you collected from customers. The difference is remitted to Canada Revenue Agency (CRA). Allowable business expenses which are eligible for input tax credits include merchandise, advertising services, office furniture, equipment, rent, and office supplies. If your business collects less GST and HST than it pays, you can apply to CRA for a rebate.
2. The quick method
The quick method does not require you to track the exact amount of GST or HST collected on each sale or service, and you do not have to claim input tax credits. Instead, you simply pay a set percentage rate of your total sales to CRA. The rate will depend on your annual sales, the type of business, and where your business is located. The quick method presumes that you collect more GST and HST than you pay.
In order to be able to use the quick method, a businesses annual revenue (from taxable supplies) cannot be more than $400,000.
- individuals who provide legal or accounting services
- individuals who provide bookkeeping, financial consulting, tax consulting or tax preparation services
- public colleges, school authorities, or universities.
Reporting and remitting GST or HST
The total amount of your annual revenue will determine when you have to report and remit GST and HST.
- If your revenues are $1,500,000 or less, you are only required to report annually. If you have an annual reporting period, you usually have to file your return and remit any amount owing no later than three months after the end of your fiscal year.
- If your revenues are between $1,500,000 and $6,000,000 you are required to report quarterly. If you have a quarterly reporting period, you have to file your GST/HST return and remit any amount owing no later than one month after the end of your reporting period.
- If your revenues are more than $6,000,000 you are required to report monthly. If you have a monthly reporting period, you also have to file your GST/HST return and remit any amount owing no later than one month after the end of your reporting period.
Your GST/HST payment is due by April 30th if all of the following conditions are met:
- you are an individual with business income for income tax purposes,
- you file annual GST/HST returns, and
- you have a December 31 fiscal year-end.
Although your payment is due April 30th, you have until June 15th to file your GST/HST return.
Small suppliers – revenue $30,000 and less
Generally, you are considered a small supplier and are not required to register and collect / remit GST/HST (although you may volunteer to do so) if the total amount of all your revenue (before expenses) from all your businesses and those of your associates, is $30,000 or less in any single calendar quarter and in the last four consecutive calendar quarters.
For general information about GST/HST, contact Canada Revenue Agency.
For legal advice and assistance with tax planning, a CRA tax dispute, or other tax issues, contact Tax Chambers LLP
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