Originally Published: June 20, 2016
Most business owners in Ontario will have to charge, collect and remit certain taxes. Whether or not you have to undergo this process will ultimately depend on the type of business that you have, as well as its location and structure. The tax that business owners are responsible for charging, collecting and remitting in Ontario is HST, otherwise known as harmonized sales tax.
HST combines PST and GST into one tax. Ontario collects HST at 13%. Some goods and services are are zero-rated, which means that while HST still applies, it is applied at 0%. This includes basic groceries, prescription drugs and livestock and fishery products. Other items are exempt from HST, including child care, health (including dental services), legal aid and music lessons. Keep in mind that if your business makes less than $30,000 in a 12-month period, you will not have to register for HST. If this does not apply to you, here is a guide to collecting and remitting HST in Ontario.
How to Collect HST:
- Register for a GST or HST account through the Canada Revenue Agency.
- You can get back the HST that you pay on business-related purchases in the form of input tax credits.
- You might need a Business Number to be able to charge, collect and remit HST. This account number is very important as it will allow you to deal with the federal government when it comes to taxes, payroll and other important elements of your business. Register for a Business Account here. The BN number is automatically provided by mail from Revenue Canada for a new Ontario incorporated company.
How to Send HST to the Government:
- File a return for each reporting period. The reporting period would have been assigned to you when you registered for your GST or HST account. The reporting period will be based on how much taxable revenue you have earned. Your return will indicate how much HST you collected during that particular period, as well as the input tax credits you are claiming.
How to File a Return: Most business owners are required to file their returns electronically or online via GST/HST Netfile or GST/HST Internet File Transfer. Other Important Information:
- Be sure to inform your customers that you will be collecting HST. You can do this through receipts, invoices or contracts.
- Keep in mind that you will have to apply different sales tax to out-of-province and foreign customers.