Whether you operate a business as a sole proprietor, as part of a partnership or through a Corporation, you must register for GST/HST once your sales exceed $30,000/year. However, you can choose to register, even if your sales are below the threshold. If any of the below apply to you, you may want to consider registering for GST/HST even when you are not required to do so:
Appearances
If you are not registered for GST/HST, you cannot collect GST/HST on your invoices, as such your clients will know that your annual sales are below $30,000, and once you register, they will know you have reached that level of sales. Registering for GST/HST means that your clients do not know the size of your operations.
Clients
Registering for GST/HST means that you must collect GST/HST on all your sales. If you predominantly sell to individuals or businesses that are not GST/HST registered, registering will increase the cost of your products or services by the GST/HST, and may make you less competitive, unless you build the GST/HST into the price you charge. On the other hand, if most of your clients are businesses that are registered for the GST/HST, they will not be affected by your decision to register, and the GST/HST is not a cost for them.
Cost of supplies
Not registering for GST/HST, means that any GST/HST that you pay on your expenses, cannot be claimed back, and is treated as part of the expense cost. For instance, if you buy a computer for $1,500 + $195 (ON HST), your purchase will be treated in either of the following ways:
- GST/HST registrant – cost of computer $1,500, HST refund $195. Actual cash cost $1,500, before income tax deduction
- GST/HST non-registrant – cost of computer $1,695, actual cash cost $1,695, before income tax deduction
Type of business
If you have a business that relies heavily on supplies or product purchases, you may wish to register, to reduce your cost, according to the above. If on the other hand, you run a service-based business with little to no purchases, you may wish to register and file an election to use the simplified GST/HST method, to potentially receive more GST/HST back than you have actually paid.
If you wish to discuss your specific situation, or to obtain more information, please contact us.
