Do I Need to Register for GST/HST in Canada? What Every Service Business Owner Should Know

This is one of those things that sounds simple until it isn't. And I say that because just this week I onboarded a client who has been running her business for two years, doing multiple six figures, and had never registered for GST/HST. Not once. Never charged it to a single Canadian client.

Now we have a significant amount of work to do to calculate what should have been charged, contact CRA, get her properly registered, and remit everything that should have been collected. It's not fun, it's not cheap, and it was completely avoidable.

So let's talk about it.

Do I Need to Register for GST/HST in Canada? What Every Service Business Owner Should Know

The $30,000 rule

In Canada, you are required to register for GST/HST once your business revenue exceeds $30,000 in a single calendar quarter, or across four consecutive calendar quarters. That's it. That's the threshold.

Once you exceed the $30,000 threshold, you have 29 days to register. And your effective date of registration goes back to the day you exceeded the threshold, not the day you actually register. Which means if you wait, you may already owe tax you never collected.

If you don't register before your sales hit $30,000, CRA may require you to remit GST/HST that you should have charged out of your own pocket, even if you didn't collect it from your clients.

Read that again. Out of your own pocket. Money you never collected, now owed to the government.

My recommendation is to not wait until you hit $30,000. If you can see that you're getting close, register now. It takes the pressure off and means you're set up properly before you have to be.

How to know if you're actually registered

This is where I see a lot of confusion. Being incorporated does not mean you are registered for GST/HST. Having a business number does not mean you are registered for GST/HST. You need to have actively registered for a GST/HST program account with CRA.

When you are properly registered, you will have a GST/HST number. In Canada that number typically ends in RT0001, as in the letters R and T, then 0001. That is your confirmation that you are registered and authorized to collect sales tax on behalf of the government.

If you are not sure whether you are registered, log into your CRA My Business Account. If you do not have a CRA My Business Account, please stop what you're doing after you finish reading this and go create one. Seriously.

If you're a sole proprietor, your income tax filings sit under your personal SIN number and you will need a CRA login for your personal taxes. If you have a corporation, your business has its own profile. Either way, having access to that portal means you can see exactly what is filed, what is owing, and what CRA has on record for your business. Too many business owners find out they owe money because an email got missed or nobody was checking. Your My Business Account removes that blind spot.

Where it gets more complicated: charging the right rate to the right client

Once you're registered, you need to charge GST/HST correctly. And this is where the province of supply rules come in.

The general principle is that you charge based on where your client is, not where you are.

If you are in Ontario and your client is in Alberta, you cannot charge them 13% HST. Alberta does not have HST. You charge them 5% GST. If your client is in British Columbia, you charge 5% GST on your services unless you are also registered to collect BC's provincial sales tax, which is a separate registration entirely. If your client is in the United States, they are exempt from Canadian sales tax altogether.

This is exactly the situation I walked into with my new client. She had Canadian clients across multiple provinces and was not charging any of them sales tax. US clients, fine, they're exempt. But her Canadian clients should have been charged the applicable rate based on their province. That's a significant amount of uncollected tax that now has to be sorted out.

If you are unsure what rate applies to a specific client situation, ask your bookkeeper, ask your tax accountant, or call CRA directly. This is not something to guess on.

What your GST/HST number actually means for your business

When you are registered and collecting GST/HST, you are collecting it on behalf of the government. It is not your money. It sits in your account temporarily and gets remitted to CRA on a monthly, quarterly, or annual basis depending on your filing frequency.

The upside is that you can also claim Input Tax Credits, which means you get back the GST/HST you paid on business expenses. That is money back in your pocket, and it's one of the reasons some businesses choose to register voluntarily even before they hit the $30,000 threshold.

The bottom line

If you are running a service business in Canada and making anywhere close to $30,000, register now. Do not wait until you cross the threshold to figure it out. The cost of getting this wrong is significantly higher than the cost of getting it right from the start.

And if you are already past the threshold and not registered, do not panic but do act quickly. The longer you wait, the more complicated it gets.

At WMS we help clients get registered, set up properly in their accounting software, and make sure every transaction going forward has the correct sales tax treatment. If you are not sure where you stand, book a free 20-minute discovery call and we will figure it out together.

About WMS Bookkeeping

WMS is a Canadian virtual bookkeeping and financial support team founded by Anora Weste. We work with agencies, consultants, therapy practices, and professional service firms doing $100K+ across Canada. Black-owned. Canada-wide.

Book a free 20-minute discovery call: wmsbookkeeping.com