Transcript

Host: Welcome to the segment called Who needs a GST/HST account?, part of the CRA’s GST/HST Information for a New Small Business video.

With me is John Kelly.

Welcome John.

Subject matter expert: Thank you Kathleen.

Host: Tell me, when would a business register for a GST/HST account?

Subject matter expert: There are two basic scenarios related to registering for the GST/HST.

In certain cases registering your business for a GST/HST account is mandatory and in other cases you may choose to register voluntarily.

We’ll examine each situation in turn, but we will start with the rules for mandatory registration.

Host: Ok. When is it mandatory for a business to register for a GST/HST account?

Subject matter expert: You must register if you provide taxable supplies in Canada, and you no longer qualify as a small supplier.

Host: Can you tell me when I would know when I am no longer considered a small supplier?

Subject matter expert: The main factor in determining if you are no longer considered a small supplier is whether you have exceeded the small supplier threshold.

Host: What is the threshold?

Subject matter expert: The small supplier threshold for businesses, other than public service bodies and charities is $30,000 in worldwide taxable supplies made by you and persons associated with you in one calendar quarter or in four consecutive calendar quarters.

The effective date of your GST/HST registration depends on when you go over the small supplier threshold amount of $30,000.

Host: Are there any situations where you must register for a GST/HST account even if you haven’t reached the $30,000 in taxable supplies?

Subject matter expert: Yes there are. You are required to register for the GST/HST if you are a taxi or limousine operator whose fares are regulated by federal or provincial laws, even if your revenues are $30,000 or less. For example, this requirement applies to self-employed taxi drivers, operators of taxi stands, and taxi plate owners who also drive a taxi.

Also, special rules apply to public service bodies and charities.

For more information on when you are required to register go to the CRA webpage on mandatoryregistration. The link is included in the Related links for this segment.

Host: You mentioned earlier about exceeding the small supplier threshold in either one calendar quarter or in four consecutive calendar quarters.

What’s the distinction here?

Subject matter expert: Whether your sales exceed the small supplier threshold in one calendar quarter or four consecutive calendar quarters affects the date that you’re required to register for the GST/HST.

The effective date of registration for the GST/HST is important because it helps set up your reporting requirements, and it establishes the date that you become both liable to collect the GST/HST and eligible to claim input tax credits.

Host: What happens if I exceed the threshold in one calendar quarter?

Subject matter expert: If you exceed the $30,000 threshold in one calendar quarter, you stop being a small supplier. You then have to charge the GST/HST on the sale that made you exceed the threshold. The date of this sale is your effective date of registration. You would be required to register for a GST/HST account with the CRA no later than 29 days after the day you made this sale.

Host: What if I exceed the threshold in four consecutive calendar quarters?

Subject matter expert: If you are under the threshold amount in one calendar quarter, but you are over the threshold during four consecutive calendar quarters, you are considered to be a small supplier for those four calendar quarters and one month following those quarters.

Your effective date of registration would be the day the first supply was made after you stop being a small supplier. You have 29 days from this day to register for the GST/HST. However, you would be required to charge the GST/HST from the date you exceeded the threshold amount.

Host: Can you give us an example to make it a little easier to understand?

Subject matter expert: Certainly. Here is an example of when a person exceeds the threshold in one calendar quarter. Let’s say I start my business in January, and for the first three quarters, until September 30th, I have taxable supplies of $25,000.

So at this point, I don’t have to be registered for the GST/HST.

In the fourth quarter from October 1^st to December 31^st, I have taxable supplies of $40,000 for this quarter, which includes a sale of $15,000 on November 20th, pushing my sales for the quarter of October, November and December over $30,000.

Since the November 20th transaction pushed me over the $30,000 threshold for the quarter, I have to collect GST/HST on that transaction, and any taxable sales made after that.

My GST/HST registration date is November 20th.

Now, if the November 20th transaction did not occur, my taxable supplies for the fourth quarter would be $25,000 and I would not have exceeded the threshold for the calendar quarter of October, November, and December. However, I would have exceeded the threshold over four consecutive calendar quarters, January through to December, as my taxable supplies for this period are $50,000. In this case, I have to collect GST/HST on any taxable sale I make on or after February 1st of the next year and I would have 29 days from the first day I was required to charge tax to register for the GST/HST.

Host: After I’ve stopped being a small supplier, how long do I have to register?

Subject matter expert: In either case, you have 29 days from your effective date to register with the CRA for the GST/HST, but you still have to charge the GST/HST from the date of the supply that put your over the threshold whether or not you completed the registration process.

Host: Ok, so that covers mandatory registration for the GST/HST.

Can a business owner register for a GST/HST account voluntarily?

Subject matter expert: Yes. If you are engaged in a commercial activity in Canada and if your and your associates’ worldwide revenues from taxable supplies are $30,000 or less, you may choose to voluntarily register for the GST/HST. But after you voluntarily register for the GST/HST, you have to start collecting and sending the tax to the CRA, even if you are still a small supplier.

Host: I’m a business owner, why would I decide to register voluntarily?

Subject matter expert: Well Kathleen, there are a number of reasons why you may want to register for a GST/HST account even though you don't have to. For example: you may want to claim input tax credits to recover the GST/HST you pay or owe on your business purchases or on property your business had on hand when you became a registrant. For example, a tradesperson may want to recover the ITCs on the current fair market value of their tools if they decide to start their own business. After your business is operating, you may want to register voluntarily before your and your associates’ total worldwide revenues of taxable goods and services exceed $30,000; or your clients might choose to do business only with businesses registered for the GST/HST.

Host: What if you change your mind about registering?

Subject matter expert: If you have registered voluntarily, you have to stay registered for at least one year before you can deregister, unless you stop your commercial activities.

Host: Now that I understand when I can register, is there anything I need to get before I can register?

Subject matter expert: Before you can register for a GST/HST account, you need to get a business number or BN from the CRA. Your BN is your business identification number and is required for all your business dealings with the CRA.

More information is available in the publication, Booklet RC2, The Business Number and Your Canada Revenue Agency Program Accounts. The link is included in the Related links for this segment.

Host: Can I register for a business number and a GST/HST account number at the same time?

Subject matter expert: Yes you can. To get a BN, and register for a GST/HST account, go to the CRA’s Business Registration Online service, which is a one stop, online, self-serve application that lets you register for the GST/HST, as well as other business number accounts.

For more information on the Business Registration Online service, go to the CRA webpage at www.cra.gc.ca/bro.

Alternatively, you can also fill out Form RC1, Request for a Business Number and send it by mail or fax to your Tax Centre. The links are included in the Related links for this segment.

Or you can call the CRA’s Business Enquiries at 1-800-959-5525.

Before calling, be ready to give the Business Enquiries officer the same information requested on form RC1, Request for a Business Number.

Host: Is it that easy to deregister or close my GST/HST account as well?

Subject matter expert: It is simple to deregister or close your GST/HST account.

You can use Form RC145, Request to close business number accounts and send it to your tax centre or call the CRA’s Business Enquiries at 1-800-959-5525. The link is included in the Related links for this segment.

Host: What do I have to do after making the request to close the account?

Subject matter expert: If you’re holding property that was for consumption, use, or supply in your commercial activities when you close your account, you may have to pay the GST/HST on the fair market value of that property on your last return.

For more information, go to the CRA webpage on capital property held at the time of closing a GST/HST account. The link is included in the Related links for this segment.

When you close the account, you will need to file any outstanding returns, and remit any amount owing, for all reporting periods up until the date you deregister your account.

Host: Is there anything else I should know before closing my GST/HST account?

Subject matter expert: Yes; depending on your situation, there may be other things you need to know.

For more information, go to the CRA webpage on Deregistering your GST/HST Account. The link is included in the Related links for this segment.

More information is also available in the segment of this video called Deregistration of your GST/HST account and in the following publication:

GST/HST Memoranda Series 2.7 Cancellation of Registration.

Host: What if I forgot to deregister when my business closed, and I’m still getting GST/HST returns and notices?

Subject matter expert: When you close your business, you need to let the CRA know by deregistering your account.

If you forget to deregister your account after closing the business, make sure to file all outstanding returns and remit any amounts owing for reporting periods up until the date you deregister, even if there was no business activity. For example, if you closed your business on May 1, but did not deregister your GST/HST account until June 15^th, you would file returns for all reporting periods up until the day you deregistered.

Host: Thank you John.

This concludes the segment called Who Needs a GST/HST Account?, part of the CRA’s GST/HST Information for a New Small Business video.

Thank you for watching.