Many online coaches use different platforms to collect their sales. Trainerize and Stripe are some of the most popular ones. But the way you are using these may cause you to give up too much money to the government.
First, we need to explain the concept of sales tax.
If you’re a business registered in Canada (this applies to both sole proprietorships and corporations), you will need to register to collect GST/HST for the government. Think of it this way: in exchange for allowing you to operate your business, the government requires you to collect sales tax on their behalf and then remit it to them on a regular basis. That’s a pretty nice deal for the government. But you need to remember, THIS IS NOT YOUR MONEY. The sales tax you are collecting has to be remitted to the government. You do get to offset the GST you collect using the GST that you paid on purchases (also called GST ITCs).
To add to this beautifully complex system, you also need to be aware of the different tax rates in the various provinces.
Alberta, for example, does not have a provincial portion. You only have to collect 5% GST. Ontario has 13% HST (it combines the provincial and federal portion).
So why is this important?
What we have found in the online coaching industry is that rather than adding the tax on top of the sale, you are likely backing out the tax and keeping less of your revenue. Many of these platforms do not show you where the customer is located. Because it is very difficult to track this for each customer, you are probably playing it safe and using 13% as the rate for all of your customers. So if you have a sale for $500 and your customer is located in Alberta, you are giving the government $60 of that sale instead of the $24 they are entitled to.
Do you see how these can start to add up?
If you think this is applicable to you, please reach out and let’s see if we can find a way for you to keep more of your revenue to re-invest into yourself and your business!