GST/HST – Do I need it? How do I remit it?

The GST/HST (Goods and Services Tax/Harmonized Sales Tax) are sales taxes that Canadian businesses must collect and remit to the government. With some exceptions, all businesses are responsible for paying applicable taxes at the federal and provincial level in the form of the Federal GST (Goods and Services Tax) and the Harmonized Sales Tax. In order to account for and remit these taxes, you must register your business for a GST/HST account.

Certain products and services are exempt from these taxes. Livestock and feminine hygiene products are both exceptions, for example, along with services like residential housing, health care and dentistry, certain child care services, and many educational services. Businesses don’t have to charge sales tax on these items or remit them to the Canadian government via the GST/HST Registry. Also, “small suppliers,” or those that earn less than $30,000 in a calendar quarter or over the last four consecutive calendar quarters.

Non-resident businesses without a permanent establishment and that don’t engage in any business in Canada don’t have to register for or pay this tax. Also, certain groups of people are exempt from being charged GST/HST, such as Indigenous peoples, and provincial and territorial governments.

How do you register for the GST/HST?

Once you determine you must start collecting and remitting this sales tax, you can begin the registration process on the Canada Revenue Agency (CRA) website.

Before registering

Before you start the process of registering for a GST/HST account, you need to have some information handy:

Effective date of registration

Your effective date of registration is usually the day you stop being a small supplier. It could also be an earlier date.

Your fiscal year

Typically your fiscal business year for the GST/HST is the same as your tax year for income tax purposes. Generally, the tax year for the following “persons” is a calendar year:

  • Individuals and certain trusts
  • Professional corporations that are members of a partnership (such as a corporation that is the professional practice of an accountant, a lawyer, or a doctor)
  • Partnerships, where at least one member of the partnership is an individual, a professional corporation, or another affected partnership

Some persons use non-calendar tax years. If this is the case, you may choose the same year as your GST/HST fiscal year. Corporations use the same fiscal year for both income tax purposes and GST/HST purposes. However, if a corporation has a non-calendar tax year for income tax purposes, it can use a calendar year for its GST/HST fiscal year.

Total annual revenue

To calculate your total annual revenue, include revenues from your taxable sales, leases, and other supplies, including zero-rated supplies (0% tax rate) as well as taxable supplies of all your associates. If you are a new business without revenues, you can give the CRA an estimate of your income for the year.

Basic information

You’ll need to provide personal information:

  • Social insurance number (SIN)
  • Date of birth
  • Personal postal code (where you live)

You’ll need to provide your business information:

  • Business name
  • Business number* (if the business already has one)
  • Type of business or organization (such as sole proprietor, partnership, corporation, registered charity)
  • Name and SIN of all owners
  • Physical address
  • Mailing address (if different from the physical address)
  • Description of major business activity

*Note: It’s important to know that your GST/HST account number is part of a business number (BN). If you don’t have a BN yet, you will receive one when registering for your GST/HST account.

Ways to register for your GST/HST account

The CRA allows you to register in a few different ways:

  • Online
  • By mail or by fax
  • By telephone

What do you do after confirming your GST/HST account number?

You will receive a GST/HST account number to confirm that your registration is complete. You can access this number on the “My Business Account“ section of the CRA website. In your account, you can manage your program accounts online and see your GST/HST information.

Once you receive your number, you’re required to start remitting the sales tax you collect to the Canadian government.

Charge and collect the GST/HST

In essence, the tax rate to charge depends on the place of supply or where you make your sale, lease, or other supply. The rate for other taxable supplies depends on the province or territory. The current rates are:

  • 5% (GST) in Alberta, British Columbia, Manitoba, Northwest Territories, Nunavut, Quebec, Saskatchewan, and Yukon
  • 13% (HST) in Ontario
  • 15% (HST) in New Brunswick, Newfoundland and Labrador, Nova Scotia, and Prince Edward Island

The rules around charging and collecting sales tax can get somewhat complicated, especially if you do business and make sales across several provinces and territories in Canada. If possible, use accounting software or the help of a financial professional to ensure you are in compliance with the requirements for federal sales taxes.

Complete and file a GST/HST return

The personalized GST/HST return (Form GST34-2) has your filing due date at the top of the form. The due date of your return is determined by your reporting period.

The CRA will charge penalties and interest on monies not paid and returns not filed by the due date. Even if you don’t have any business transactions or taxes to pay, you must still file a GST/HST return.

Remit sales tax

Your payment is due at the same time as your GST/HST returns.

Why should I register for the GST/HST?

If you sell products and services in Canada, it’s something that you cannot avoid. If you’ve reached the revenue threshold and don’t remit the applicable sales tax, you could face financial penalties.

One part of financial health includes remaining solvent to the best of your ability—which includes paying your tax obligations on time and as agreed. Taxes are one of those liabilities that can negatively impact your business if not handled properly.

Registering for the GST/HST, charging, collecting, filing and remitting sales tax will ensure you are following the law and setting yourself up for financial success on both a personal and business level.

Year-End Guide: December 2021

Year-End Guide: December 2021

Year-end guide: December 2021

It’s a good idea to perform certain year-end tasks with your financial records at the end of the calendar year. Some of the tasks are just good financial housekeeping, while others are required by the government.

Fortunately, you can spread the tasks over the period from December to February.

The following sections outline information about the tasks to perform in each month, as well as employee-related tasks for the end of the year.

December tasks

December is a good time to tie up loose ends for the closing year, to make profit distributions, and to start preparing for tax time with your accountant.

Create and send customer statements

The end of the year is a good time to remind your customers of any outstanding balances that they owe to you, or to send them a statement of their activity throughout the year.

Make distributions

It’s not mandatory, but you can choose to distribute profits (also known as Retained Earnings) to the owners or partners at the end of the year.

Prepare for taxes

Many small business owners use an accountant, especially at tax time.

If you haven’t already done so, now is a good time to give your accountant access to your QuickBooks Online company so they can review your financial reports and other data, and even make any necessary changes before the end of the year.

January tasks

January is when you should reconcile your accounts, prepare summary reports, and (optionally) close your books for the previous calendar year.

If you haven’t already done so, it’s also a good time to get in touch with your accountant and talk about preparing for tax time.

Reconcile your accounts

At the end of the year, and when you prepare your taxes, you’ll want to have the most up-to-date and correct information in your financial reports. Reconciling can help ensure that.

When you reconcile an account, you compare the beginning balance and transactions listed in your QuickBooks Online company file with your monthly bank or credit card statements to make sure they match. Reconciling is like balancing a chequebook, as you review your bank statement to make sure it matches the amounts you recorded in your cheque register.

The process helps to ensure that important financial reports, like your Balance Sheet, are accurate.

Reconciling can seem intimidating if you haven’t done it before, or if you haven’t done it for a while if we can be of assistance please get in touch

Run Balance Sheet and Profit and Loss reports

The start of the new year is the natural time to run reports and evaluate how your business performed over the previous year.

Running reports is also an essential part of preparing for taxes.

The two most important reports that you and your accountant will need are the Balance Sheet and Profit and Loss reports, and it’s a good idea to run these reports at the beginning of the year. Make sure the date range in the Transaction Date field for these reports covers the year you’re reporting on.

February tasks

The bulk of your year-end work should be complete by February, with just a task or two to finish up and prepare for taxes.

Prepare for taxes

An accountant is a valuable resource, especially at tax time. If you don’t have one or are looking for a change give us a call 

Payroll – Do you have employees?

If you have employees (not independent consultants or contractors), there are additional tasks you should complete at the end of the year, along with additional government forms to file and deadlines to meet.

  • If you use standard QuickBooks Online Payroll, you can access information about year-end payroll tasks in QuickBooks Online by selecting Employees from the left menu, and then selecting Payroll year-end guide.
  • If you use a different payroll provider, it’s important that you consult them for items and forms to complete for the end of the year.

Review these important direct deposit cut-off dates as you plan your year-end payroll work.

Payroll dateApprove payroll by
December 24, 2021December 22, 2021
December 25, 2021N/A on holiday
December 26, 2021N/A on holiday
December 27, 2021N/A on holiday
December 28, 2021N/A on holiday
December 29, 2021December 23, 2021
December 30, 2021December 24, 2021
December 31, 2021December 29, 2021
January 1, 2022N/A on holiday
January 3, 2022N/A on holiday
January 4, 2022December 30, 2021
January 5, 2022December 31, 2021

Other dates to remember

As you work through your year-end plan, don’t forget these important dates for your T4 and RL-1 forms.

  • January 4, 2022- Electronic filing options are available online with Canada Revenue Agency and Revenu Québec.
  • February 28, 2022- The deadline to export your T4 file and submit T4s and RL-1s with CRA and Revenue Quebec. You also must provide your employees a copy for their own records, which they use to do their personal income tax. 

 

 

Managing the Bottom Line

If you don’t keep track of how much money you’re making, you have no idea whether your business is successful or not. You can’t tell how well your marketing is working. And I don’t just mean you should know the amount of your total sales or gross revenue. You need to know what your net profit is. If you don’t, there’s no way you can know how to increase it.

If you want your business to be successful, you need to make a financial plan and check it against the facts on a monthly basis, then take immediate action to correct any problems.

Here are the steps you should take:

  • Create a financial plan for your business.
    • Estimate how much revenue you expect to bring in each month, and project what your expenses will be.
  • Remember that lost profits can’t be recovered.
    • When entrepreneurs compare their projections to reality and find earnings too low or expenses too high, they often conclude, “I’ll make it up later.” The problem is that you really can’t make it up later: every month profits are too low is a month that is gone forever.
  • Make adjustments right away.
    • If revenues are lower than expected, increase efforts in sales and marketing or look for ways to increase your rates. If overhead costs are too high, find ways to cut back. There are other businesses like yours around. What is their secret for operating profitably?
  • Think before you spend.
    • When considering any new business expense, including marketing and sales activities, evaluate the increased earnings you expect to bring in against its cost before you proceed to make a purchase.
  • Evaluate the success of your business based on profit, not revenue.
    • It doesn’t matter how many thousands of dollars you are bringing in each month if your expenses are almost as high, or higher. Many high-revenue businesses have gone under for this very reason — don’t be one of them.

Improve Your Business Planning Process with a SWOT analysis

Use this tool to improve your planning process.

For an organization to succeed, it should comprehend, understand and utilitize its strong qualities and shortcomings in its current circumstance. A SWOT investigation is quite possibly the most widely recognized tool organizations use to examine their present condition and position themselves for what’s to come. It is frequently utilized as a feature of a strategic business action plan, as well as to evaluate projects or parts of an organization.

What is a SWOT analysis?

SWOT is an acronym for strengths, weaknesses, opportunities, and threats.

The SWOT analysis helps you see how you stand out in the marketplace, how you can grow as a business, and where you are vulnerable. This easy-to-use tool also helps you identify your company’s opportunities and any threats it faces. The process takes account of both the internal and external factors your company must navigate.

Strengths and weaknesses are often internal to your organization, while opportunities and threats generally relate to external factors. For this reason, the SWOT Analysis is sometimes called internal-external analysis, and the SWOT matrix is sometimes called an IE matrix.

What are the benefits of a SWOT analysis?

What makes SWOT particularly powerful is that, with a little thought, it can help you uncover opportunities that you are well placed to exploit. By understanding the weaknesses of your business, you can manage and eliminate threats that might otherwise catch you unaware.

By using the SWOT framework to look at yourself and your competitors, you can craft a strategy that helps you distinguish yourself from your competitors and better compete against them in your market.

How do you complete a SWOT analysis?

A SWOT analysis is generally completed by gathering input from their team during a workshop. These workshops are often facilitated by a strategic planning consultant.

It can be useful to gather the following information before completing a SWOT analysis:

Outside your company:

  • What are the market trends in your industry?
  • What is your market share?
  • Who are your main competitors?
  • How can you stand out in the market?
  • How do clients perceive you?
  • What pitfalls and dangers await you?

Inside your company:

  • Sales and marketing performance
  • Financial performance and trends
  • The efficiency of your systems and processes
  • Key internal personnel, competencies, and governance structure
  • Your company’s culture and strategy
  • Your mission, vision, and values

With this information in hand, you’ll be ready to assess your company’s internal strengths and weaknesses, after which you can focus on external factors that could impact your company.

Strengths—Make a list of your company’s internal strengths. These are any competitive advantage, skill, proficiency, experience, talent, or other internal factors that improve your company’s position in the marketplace and can’t be easily copied.

Examples include:

  • solid financing
  • a superior brand
  • valuable intellectual property
  • superior technology
  • modern equipment and/or machinery
  • a well-trained sales team
  • low staff turnover
  • management expertise
  • operational efficiency
  • high customer retention
  • good supplier relationships

Consider your strengths from both an internal perspective, and from the point of view of your customers and people in your market.

Also, if you’re having any difficulty identifying strengths, try writing down a list of your organization’s characteristics. Some of these will hopefully be strengths.

When looking at your strengths, think about them in relation to your competitors. For example, if all of your competitors provide high-quality products, then a high-quality production process is not a strength in your organization’s market, it’s a necessity.

Weaknesses—These are the factors that reduce your company’s ability to achieve its objectives.

Examples include:

  • unreliable suppliers
  • outdated equipment and/or machinery
  • insufficient marketing efforts
  • lack of financing
  • management weaknesses
  • gaps in expertise

Again, consider this from an internal and external basis: Do other people seem to perceive weaknesses that you don’t see? Are your competitors doing any better than you?

Be as honest as you can when identifying these deficiencies. It’s best to be realistic now and face any unpleasant truths as soon as possible. Ignoring weaknesses means you can’t make decisions that will strengthen your company.

Opportunities—Opportunities are external factors that allow your business to grow and be more profitable.

Examples include:

  • new potential markets
  • innovations
  • technological advances
  • consumer trends
  • support from governments, the community or business partners

Opportunities should reference demand for your products and services or development potential.

Threats—Threats are external obstacles your business must overcome.

Examples include:

  • a declining economy
  • a consumer shift to other products
  • technological change
  • a labour shortage
  • community opposition
  • legal or regulatory changes

It’s often useful to take a close look at your competitors’ strengths to identify external threats to your company. Again, be as honest as possible.

A SWOT analysis doesn’t have to be a long, complex document. Two or three pages of point-form notes are usually sufficient to focus on essential findings.

SWOT – Questions to consider

Free SWOT analysis template

Download our free SWOT analysis template.

What is a SWOT analysis used for?

A SWOT analysis will position you to seize opportunities and prepare effective strategies. Getting a clear and realistic view of your internal environment will help you identify ways to better satisfy clients, achieve your objectives and strengthen weaker areas that have an impact on your performance.

Analyzing your external environment help you prepare for opportunities (e.g., changing demographics, the announcement of a new residential development in the area, a new trade agreement) and threats (e.g., new technologies, changing exchange rates, loss of a major employer in the community, new trade agreement) that will affect your business in coming years.

Having identified these strengths, weaknesses, opportunities, and threats, you should work with your team to develop an appropriate response by answering the questions below:

How do I use a SWOT analysis in my strategic plan?

Don’t make the mistake of preparing a SWOT analysis and then ignoring it as you develop your strategic plan. Your plan should include concrete steps to harness your company’s strengths in order to target the opportunities identified in your analysis.

The actions identified as priorities should be incorporated into an action plan that sets a deadline and identifies a person responsible for carrying them out.

Regular action follow-up on your action plan is important. You can download a Business Strategic Action Plan Template here.