One of the decisions a small business owner will have to make is when, or if, they should get an HST number (a unique tax identification business number). If you do not have an HST number you cannot charge HST. The same is for vendors that you deal with, if they do not have an HST number, they cannot charge you HST. There are several factors to weigh, so I have compiled a number of things to consider that will help you with the question “should I get and HST number?”. If you are in a situation where it is not clear if you should get an HST number or not, consult an accountant where they can walk you through what will be best for you and your business in the long term.
When to report/get an HST number?
It’s true, there can be benefits to registering for an HST number early (before $30,000). Here are a some to name a couple:
- The general rule of thumb is once you hit $30,000 in earnings within 4, or fewer, consecutive calendar quarters you must register and start to collect HST.
- Once you have reached the threshold of earnings you have 30 days to register.
- Some business register before reaching $30,000, but once you start collecting HST you have to remit HST to Canada Revenue Agency.
To register for an HST number, go to: https://www.canada.ca/en/revenue-agency/services/tax/businesses/topics/gst-hst-businesses/account-register.html
Reasons why a business would benefit by registering for an HST number early
- You can’t claim HST input tax credits (HST paid on business expenditures) if you are a not HST registered. If your ITC exceed the HST you have collected, and your input tax credits exceed HST collected on sales, you can claim a refund from Canada Revenue Agency. In order to do this though you must already be registered for HST.
- If you do not have an HST number it communicates that you are earning less than $30,000 in a year. If your customers are other businesses, they expect to pay HST.
- Registering for HST when you start a business reduces the possibility of unintentionally exceeding the $30,000 threshold and being exposed to penalties and interest charges for noncompliance.
Should I cancel my HST number?
A lot of small business owners have HST numbers and wonder if they should cancel it if they are not hitting the $30,000 mark in revenue. Even if you are not earning 30K, you may want to hold off cancelling your HST number for a couple reasons.
- You need to have an HST number if you reach a threshold of revenue $30,000+. If you do not have one, CRA will deem that you do and will assess HST.
- Unless you are closing the business you may want to wait to close your HST account. There is a process and if it is not closed properly there may be repercussions.
- If there is a chance that you will need to charge HST in the future, it is best to hang on to your business number (even if you are not reaching the 30K threshold), rather than suspend and register again in the future.
How to cancel my HST number
If you want to suspend or close your HST account you can take the following steps.
- If you are closing the business, you are assumed to be disposing of the assets of the business and have collected GST/HST on the sale of the assets. You will need to determine the fair market value of the assets and report this on the final GST/HST return.
- If you are closing your HST account make sure you file any outstanding GST/HST returns for the period up to the day the account is closed (and pay any remittances due). Remember, if you have collected HST you are required to remit it.
- You will need to fill out Form RC145, Request to Close Business Number Program Accounts. You can also call 1-800-959-5525
HST can be a complicated and confusing tax, and it can come with many questions for your unique business and operations. If you have a question or would like to chat about HST reporting and your business contact me at firstname.lastname@example.org