As a small business owner in Ontario, you have probably already come across the term HST, or harmonized sales tax. You may be wondering if you need to charge it, what do you charge it on, when do you need to remit, and so on.
It can be challenging to understand all of these details, aside from the fact that you already have your hands full with running a business and managing operations daily.
To help you understand it better, we’ll be answering the most essential questions when it comes to HST in the sections below.
What Do Business Owners Need to Know About HST in Ontario?
It was in 2010 when Ontario joined the program to apply the harmonized sales tax. Aside from it, five other provinces use HST at present: New Brunswick, Nova Scotia, Newfoundland, Labrador, and Prince Edward Island. The tax rate in these provinces is 15% except for Ontario, where it is 13%.
Ontario charges this tax on most supplies of goods and services made in the province. This impacts businesses which are either located in the province or are shipping goods into it.
What’s important to note is that Ontario HST consists of a federal tax of 5% and a provincial tax of 8%—however, this is listed on invoices as a compounded 13%. Doing so allows businesses to reclaim the entire amount of sales tax.
It is your responsibility as a business owner to collect and remit HST. If your business makes $30,000 or more per year in total revenue, then you must register for a GST/HST account through the CRA. If you are a small business making $30,000 or less annually, you are not required to register for HST but may do so voluntarily. You may utilize this to recover any HST paid on business purchases or expenses.
What Are the Exemptions of HST?
HST does not apply to the following items:
- Basic groceries which are necessary for dietary needs (e.g. meat, fish, poultry, dairy products, eggs, vegetables, coffee, tea, cereals, and the like).
- Health, medical, and dental services provided by licensed practitioners
- Child care services
- Prescription drugs
When Should You Charge HST?
For goods or services which are not exempt from HST, the first factor you must look into is their place of supply. You must determine whether a supply is made inside or outside a participating province, and there are specific rules you can apply to do this.
The rules for supplies of tangible goods, personal property and real property remain unchanged. However, supply rules for intangible personal property have changed significantly.
Generally, the place-of-supply rules are based on the address of the recipient of the service in the normal course of business, but there are exceptions. For a more thorough list of requirements and examples, you may consult the Canada Revenue Agency.
Understanding HST and how it applies to your business is a challenging endeavor. This is because while it applies to most products and services, there are exemptions and conditions that you must take note of. The good news is that there’s a way for you to stay on top of CRA’s requirements easily yet effectively. Enlisting the services of experienced accountants in Ontario might be just what you need to sail smoothly in this area—and even go beyond the agency’s requirements!
If you require accounting services for small businesses in Ontario, we have got you covered! At Measured Growth CPA, we make everything simple for you and advise you with our expertise. Get in touch with us today to learn more about how we can help you keep your business activities running smoothly.