HST Explained: A Practical Guide for Canadian Small Business Owners

What Is HST?

The Harmonized Sales Tax (HST) is a combined federal and provincial sales tax applied to most goods and services sold in Canada. It replaces the separate Goods and Services Tax (GST) and Provincial Sales Tax (PST) in participating provinces: Ontario, Nova Scotia, New Brunswick, Newfoundland and Labrador, and Prince Edward Island.

If you sell in a non-participating province, you collect GST (5%) separately from PST.

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When Do You Need to Register?

You are required to register for a GST/HST account once your business's total revenues exceed $30,000 in a single calendar quarter or over four consecutive quarters. This threshold applies to most businesses, including freelancers, contractors, and sole proprietors.

You can also register voluntarily before hitting the threshold — which can be beneficial if you have significant input tax credits (ITCs) to claim.

Who Is Exempt?

• Businesses with revenues under the $30,000 small supplier threshold (unless you choose to register voluntarily)
• Suppliers of exempt supplies such as most healthcare services, educational services, and certain financial services

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How to Register

Registration is done through the CRA's Business Registration Online portal or by calling 1-800-959-5525. Once registered, you receive a Business Number (BN) with a 9-digit root and a RT 0001 suffix (e.g., 123456789 RT 0001).

Keep this number handy — you'll need it on all invoices.

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Collecting HST from Clients

Once registered, you must:

1. Charge HST on all taxable supplies you make
2. Include the HST amount and your BN on every invoice
3. Track all HST collected separately from your revenue

The HST rate depends on where your customer is located (not where you are), so if you invoice a client in Ontario, you charge 13% HST even if you're based in Alberta.

| Province | Rate | |---|---| | Ontario | 13% | | Nova Scotia | 15% | | New Brunswick | 15% | | Newfoundland & Labrador | 15% | | Prince Edward Island | 15% | | Alberta | 5% (GST only) | | British Columbia | 5% GST + 7% PST | | Quebec | 5% GST + 9.975% QST |

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Input Tax Credits (ITCs)

The major benefit of being registered is claiming ITCs — you can recover the GST/HST you paid on business expenses.

For example, if you pay $113 for a business expense in Ontario (including $13 HST), you can claim that $13 back on your return, reducing what you owe.

Eligible expenses include:

• Software subscriptions
• Office supplies
• Professional services
• Business travel
• Equipment and technology

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Filing Periods and Remittance

Your filing frequency depends on your annual revenues:

| Annual Revenue | Filing Frequency | |---|---| | Under $1.5M | Annual | | $1.5M – $6M | Quarterly | | Over $6M | Monthly |

You can request a different filing period from the CRA. Annual filers often pay quarterly installments.

Important: HST collected belongs to the CRA — keep it separate from your operating funds to avoid cash flow surprises at remittance time.

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Common Mistakes to Avoid

• Not charging HST after crossing the threshold — you're liable from the moment you exceed $30,000
• Mixing HST funds with operating cash — keep a separate account or earmark HST in your ledger
• Missing ITC documentation — you need valid receipts showing the supplier's BN and HST amount
• Incorrect place of supply — always use your client's province to determine the applicable rate

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Next Steps

Register with the CRA, set up your accounting to track HST collected and paid separately, and consult a CPA if your situation involves exempt vs. taxable supplies. Bookkeeper automatically separates HST in your transaction ledger so remittance is always accurate.