Understanding HST: What You Need to Know About Harmonized Sales Tax

So you started a business, but what about HST? When do I set it up? Should I set it up? How do I remit it? How often do I remit it? In this blog post, we will address these common questions.

What is HST?

HST is an acronym for Harmonized Sales Tax. It's comprised of a federal and provincial component, which varies by province. In New Brunswick, 5% goes to the federal government, and 10% goes to the province.

Do I have to register for HST?

Maybe. If you generate more than $30,000 in sales during a single quarter, or more than $30,000 in the entire year, you are required to register for HST. You can opt into the program before you hit this threshold.

How do I register for HST?

There a handful of ways to do this, either over the phone or via your myCRA business account.

How often do I remit my HST?

The most common frequencies are monthly, quarterly, and annually. Depending on your sales volume, the CRA may require you to increase your filing frequency. There are also considerations around cash flow (i.e. many businesses prefer to have a smaller remittance, and thus opt for a shorter remittance time-frame.) You should consult with a professional when deciding.

How do I prepare my HST?

Consult with your accountant or tax professional to prepare these figures. You'll be able to claim the HST you've paid on your business expenses. You'll also need to remit the HST you've collected from your customers. These numbers are combined on your HST return and the net difference is remitted (or a refund claimed) with CRA.

How do I file my HST?

There are a few ways. Many online banking platforms are linked with the CRA and allow you to file and pay simultaneously. You can also file on your myCRA Business account.

Is there anything else I should know? Consult with your accountant frequently to have them advise on how much HST has accumulated between remittances. Many small business owners think of HST like a "bill", when in reality its simply remitting the HST you collected from your customers. The money was never legally 'yours', despite the fact that it sits in your account. This can make it feel like a bill when the money is remitted.

If financial planning isn't your strength, consider opening an extra savings account and holding your HST in that account between remittances. This is particularly important if you are a quarterly or annual remitter, since the balance can grow fairly large.

Conclusion

While the Harmonized Sales Tax (HST) may initially seem complex, being well-prepared and informed will ensure a smooth experience. And most importantly, make sure to consult with a professional to ensure things are set up properly from the outset.