When do I charge sales tax and where do I pay it?
Inked by Blinc
May 6, 2024This is because throughout the year you collect GST/HST on your sales and then you also spend GST/HST on your expenses (also called Input Tax Credits or ITCs). As a result, the net amount, i.e. collected sales tax minus sales taxes spent, is what you have to remit and send to the government. High level, this generates money for the government to spend.
Only if you are making over $30,000 CAD in gross sales, then you must register and charge GST/HST on all sales above that amount. You may voluntarily register for GST/HST, so you don’t have to worry about it throughout the year as many small businesses do.
Typically all goods and services are subject to sales taxes. However there are a few exemptions and zero-rated supplies that are taxable at 0% such as: basic groceries, prescription drugs, financial services, certain childcare services, long term residential rent, most health and medical services, etc. More information can be found here.
Typically for small businesses doing under $1.5M in sales, this is filed annually and due 3 months after your year end.
Larger companies, if you are doing between $1.5-6M in sales, you must report quarterly and due 1 month after quarter-end. Lastly, if you are doing more than $6M in sales, you must report monthly and due 1 month after month-end.
Example: You had $100,000 in sales and charged 13% on all sales, totalling $13,000 in sales taxes collected. You also spent $79,100 during the year on expenses and included in that is $9,100 of sales taxes. At the end of the year, you must pay the government net of what you collected and what you paid ($13,000 collected - $9,100 paid = $3,900 payable to the Canada Revenue Agency).
With Blinc’s Compliance plans, GST/HST filings are done on a timely basis and accurately by our professional CPAs and updated automatically on your Blinc dashboard. If you choose to file it yourself, be sure to submit your return details on your Blinc dashboard so we may track your compliance accordingly!
All payments go directly through the Canada Revenue Agency via the My Payment page here. You may access the link through the Blinc dashboard as well. Be sure to save your receipt of payment and upload it on your Blinc minute book for future reference!
Pro Tip: All the sales tax you collected throughout the year, keep it in a separate bank account. It’s quite common for founders to spend that money thinking it was part of their sales, but instead have to pay it back to the government at the end of the year. Keep it separate!
Getting a Blinc CPA to professionally review and complete your GST/HST tax return on time and accurately can ensure you don’t incur penalties, interest and claim all you can to save on sales taxes payable.
