HST and GST look simple from the outside: you charge tax, you remit tax. In practice, a handful of misunderstandings cause most of the penalties and surprise CRA bills we see in Ontario. Here are the ones worth clearing up.
Myth 1: "I only need to register once I earn $30,000 in a year"
The small supplier threshold is $30,000 in taxable sales over any four consecutive calendar quarters, not per calendar year. A business that has a strong spring and summer can cross the line mid-year without ever hitting $30,000 on a January to December basis.
Once you cross it, you must register and start charging HST, and the CRA can hold you responsible for tax you should have collected. If your sales are growing, check your rolling total every quarter.
Myth 2: "The rate depends on where my business is located"
Generally, HST or GST follows the place of supply, which usually means where your customer is, not where you are. Ontario uses 13% HST. Other HST provinces charge 13% to 15%, while non-participating provinces have 5% GST plus their own provincial sales tax rules. If you sell across provinces, do not assume Ontario's rate applies everywhere.
Myth 3: "Zero-rated and exempt mean the same thing"
They do not, and the difference matters:
- Zero-rated supplies (like basic groceries and exports) are taxable at 0%. You still register and you can still claim input tax credits.
- Exempt supplies (like many health, education and residential rental services) carry no tax, but you generally cannot claim input tax credits on the costs of providing them.
Getting this wrong means either overpaying or claiming credits you are not entitled to.
Myth 4: "I can claim input tax credits whenever"
Input tax credits (ITCs) recover the HST you paid on business expenses, but they have time limits and documentation requirements. Claims are generally limited to a set number of years, and you need proper invoices showing the vendor's registration number. Personal expenses and some categories, like certain meals and entertainment, are only partly claimable or not claimable at all.
Myth 5: "If my corporation owes HST, it is only the corporation's problem"
Directors can be personally liable for a corporation's unremitted HST and related penalties. That is a strong reason to keep remittances current even when cash flow is tight.
Myth 6: "Closing my business closes my HST account"
It does not. You need to file final returns and formally cancel your registration. Leaving an account open can lead to late-filing penalties for periods when you were not even operating.
What to do next
- Track your rolling four-quarter taxable sales.
- Confirm which of your sales are taxable, zero-rated or exempt.
- Keep clean invoices for every ITC you claim.
- File and remit on time, every time.
Not sure where you stand? Our HST and GST filing service covers registration, returns and ITC reviews, and we will give you a clear answer on a free consultation.
This article is general information, not tax advice for your specific situation.
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