DO YOU HAVE TO CHARGE GST/HST IF YOU HAVE ONLY A LITTLE BUSINESS INCOME?

Most people know that, under the GST/HST, a business with sales under $30,000 per year does not need to charge GST/HST on their sales. (Such a person is called a “small supplier”.)

However, the rule is not that simple.

First, if you are GST/HST registered, you must charge and collect GST/HST on your sales, and remit it to the CRA (Revenu Québec, in Quebec). You might be registered because in a past year you crossed the $30,000 threshold, and you have not cancelled your registration. Or you might have chosen to register even as a small supplier, so that you can claim input tax credits on your purchases (and because your customers are businesses that do not mind if you charge them GST/HST). Either way, once you’re registered you are “in the system” and the $30,000 threshold is not relevant, until your registration is cancelled (your one registration applies to you personally and thus to all businesses you carry on). You must charge GST/HST on all your sales (unless they are exempt or “zero-rated”).

Second, when counting the $30,000 threshold, you must total up not only your own sales, but also those of other persons with whom you are “associated”. This includes any corporation you control; as well as any partnership from which you (and associated persons) are entitled to more than half the profits; and certain trusts.

Your spouse is not normally “associated” with you, but you are likely “associated” with a corporation that you and your spouse control together.

Example: You are not GST/HST-registered. You have a small consulting business in which you bill only $5,000 per year. However, you also own 60% of the shares of a company that operates a carpentry business, with $100,000 in sales a year.

Because you and the corporation are “associated”, with combined sales exceeding $30,000, you must register for GST/HST and charge GST or HST on your consulting fees.

If you neglect to do this, so that you don’t file GST/HST returns, there is no time limit for the CRA to assess you, even if you have correctly reported the income for income tax purposes. If the CRA discovers this situation 10 years from now, you could end up with a large assessment for all the uncollected tax, plus interest, plus penalties for not filing.

So beware this situation!