Practically everyone who runs their own business knows it can be challenging. But it also comes with great benefits. Not only do you achieve a sense of accomplishment, but you also get awesome tax breaks! And that’s why, when you own and operate a business in Canada, you especially need to know about the goods and services tax (GST) and the harmonized sales tax (HST), and how they apply to the goods and services you offer professionally.
Since the GST/HST varies across Canada, you’ll find this comprehensive guide to GST/HST taxes immensely helpful. Even if you are familiar with GST/HST, you may not know there are many exemptions. When goods or services are on the GST or HST exemption list, for example, you’re not required to collect and pay taxes for them. That means your customers do not pay those taxes when purchasing your products and services, and you aren’t required to remit them either since they weren’t collected. Let’s jump right into the details.
- Self-employed and side-gig professionals in Canada may be required to collect and pay goods and services tax (GST) and harmonized sales tax (HST).
- There are many goods and services that are exempt from GST/HST tax collection and remittance.
- If your business sales are less than $30,000 per year, you don’t have to collect or remit GST/HST tax.
Are all goods and services subject to the GST/HST?
The type of products or services you provide and the amount of sales your company has largely determine whether you need to charge GST/HST. There are many scenarios in which a business owner may not be required to collect or pay GST/HST for goods or services they’ve supplied. The most common exception to collecting and paying GST/HST is if you run a small business.
Do I need to charge GST/HST for my services?
Several professional services are GST/HST exempt, as are services related to providing housing. Examples of services on the Ontario HST exemption list include:
Health, medical, and dental services – When licensed physicians and dentists provide health care and dental services for medical reasons, these services are exempt from GST/HST.
Childcare services – Babysitters and daycare providers who take care of children under the age of 14 for less than 24 hours a day are also exempt.
Educational services – Many educational services are exempt, including vocational school courses, tutoring, and music lessons.
Financial institution services – Financial services such as money lending along with bank fees are exempt from GST/HST.
Legal aid – Businesses providing legal-aid services are not required to collect or remit GST/HST for those services.
Insurance services – The services agents provide to help their clients acquire insurance policies are GST/HST-exempt—this goes for both the client and the business.
Property and services provided by charities – Some types of property and services are exempt when they’re provided by nonprofit organizations. Water and food distributors, for instance, and charities that provide transit services don’t need to collect or pay GST/HST for those services.
Do I have to charge GST/HST as an independent contractor?
The CRA considers companies that sell less than $30,000 of goods and services a year a small supplier. And small suppliers are not required to register for, collect, or pay goods and services or harmonized sales taxes—unless they provide taxi or ride-sharing services.
This rule also stands if you’re an independent contractor, provided you sell more than $30,000 per year of goods or services.
Are all goods subject to GST/HST?
Not all tangible goods are subject to GST/HST. For example, GST exemptions in BC include:
Sale of a house used as a residence – If you sell real estate that was last used as residential housing, the sale is exempt from GST/HST.
Long-term residential rentals – Rentals that last one month or longer are considered long-term rentals and are GST/HST exempt.
Residential condominium fees – Condominium fees collected for residential condos are also exempt.
Zero rated products – While not technically exempt, there are many goods rated at 0% tax, thus you do not need to collect nor remit GST or HST for them. These include:
- Feminine hygiene products
- Groceries
- Livestock
- Prescription drugs
- Some medical devices
Additional tax benefits from GST/HST exemptions
Don’t think you’re too small to benefit from these exemptions. Whether you are a freelancer or operate a small online business, when your company provides GST/HST- exempt services, it can reduce your tax remittance requirements. In fact, knowing the list of qualified GST/HST-exempt services before starting your business could be a determining factor for which type of business you’d like to have.
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