HST Basics for the New Entrepreneur

Written by:  Gwyneth James MBP CPA, CGA, Senior Partner

The most common questions I get from new entrepreneurs are about HST. A quick online search will provide most of the basic information and Canada Revenue Agency (CRA) has good resources in plain English, but here are a few pointers:

You can register for HST as soon as you start your new business or you can wait until your sales reach $30,000 over any 12-month period. Once you have registered you must charge your customers HST on everything you sell (assuming your goods or services are not exempt from HST or zero-rated).

There are three reasons for registering early:

  1. You are going to be making large purchases and registering will allow you to recover the HST you spend;
  2. You don’t want your prices to jump up by 13% when you do register; and
  3. Charging HST provides the illusion of being a bigger business.

Once you are registered, you must ensure that all your invoices have your HST number on them and the HST must be clearly calculated. Likewise, any HST you claim for recovery must be clearly identified on the invoice you pay with the vendor’s HST number. All receipts must be kept; credit card statements are not sufficient.

Some items are “zero-rated” in that HST is charged at 0%. Examples are basic groceries, some agricultural products, prescriptions, and medical devices. Exported goods and services also fall in this category. As a business providing these goods, you do not collect HST, but you can claim any HST that you pay on expenses.

A limited number of goods and services are fully “exempt” which means HST is not charged. You cannot claim HST on expenses if you are running a business supplying exempt items.

Obviously this is a very high-level overview, but should address some basic questions.

Cody & James Chartered Professional Accountants