Taxes
Do I Need to Charge GST/HST?
Do I need to charge GST/HST? Learn how small supplier status works in Canada, when HST registration is required, and how to register your CRA account today.
If you run a sole proprietorship in Canada, whether you need to charge GST/HST depends mainly on your taxable revenues and on what you sell. Many new owners ask: do I need to charge GST? The short answer is that you generally must charge and collect the tax once you are registered, and registration becomes mandatory when you are no longer a small supplier. Below that threshold, registration is usually optional and may be done voluntarily.
How GST/HST applies to a sole proprietorship
For tax purposes, a sole proprietorship is not a separate legal entity. You and the business are the same person, so the GST/HST account is registered in your name under your Business Number (BN), with a program account identifier for GST/HST. When you charge tax to customers, you collect it on behalf of the CRA. It is not your money and is best kept separate from your operating funds. Each reporting period you file a return and remit the difference between the tax collected and the input tax credits (ITCs) you are entitled to claim.
Small supplier status: when you may not need to register
Most sole proprietors start as a small supplier. While your taxable supplies stay under the small-supplier threshold over the applicable measuring period, registration is generally not required and you do not have to charge GST/HST. As of the current tax year, confirm the current threshold and measuring period on the CRA website before deciding. A few points are commonly misunderstood:
- The threshold looks at your taxable supplies, not your profit.
- Certain supplies are exempt (many health, childcare and residential rent services) and do not count toward the threshold.
- Zero-rated supplies, such as most basic groceries and exports, are taxable at 0% and do count.
- A small supplier may still register voluntarily, which allows ITCs but also triggers charging, filing and remitting duties.
This is explained further in small supplier status in Canada.
When registration and charging GST/HST become required
Once you stop being a small supplier, or once you register voluntarily, you must charge the tax on your taxable supplies. Registration can also be required regardless of revenue in specific cases, such as supplying taxi or ride-sharing services, or being a non-resident making certain supplies in Canada. The table below summarises common triggers.
| Situation | Typical result |
|---|---|
| Taxable revenues below the small-supplier threshold | Registration not mandatory; voluntary registration possible |
| Taxable revenues above the threshold | Must register and charge GST/HST |
| Taxi or ride-sharing driver | Must register regardless of revenue |
| Only exempt supplies | Cannot register and cannot charge GST/HST |
| Voluntary registrant below the threshold | Must charge, file and remit once registered |
GST, HST and provincial sales taxes
Depending on where your customer is located, you may charge GST only, HST, or GST plus a separate provincial tax such as QST in Quebec. HST is a single combined federal-provincial tax used in participating provinces, while GST-only provinces generally run their own separate provincial sales tax systems. The tax treatment differs by jurisdiction, so check GST/HST rates by province for the current position in each one.
How to register and what changes afterwards
You can register for a GST/HST account through CRA My Business Account, by mail or by phone. Once registered you will:
- Charge the correct rate based on the place of supply.
- Show the GST/HST amount or your BN on invoices where required.
- File a GST/HST return at your assigned reporting frequency, which may be annual, quarterly or monthly.
- Remit net tax and claim ITCs for tax paid on eligible business purchases.
- Keep records for the required retention period.
Filing mechanics are covered in how to file a GST/HST return.
Input tax credits and voluntary registration
ITCs let you recover the GST/HST paid on business inputs such as supplies, equipment, software and certain professional fees. For a sole proprietor, ITCs are claimed on the GST/HST return and are not part of your personal income tax filing. If you are below the threshold and weighing voluntary registration, compare the ongoing compliance cost of filing against the ITCs you would recover. It often makes sense if you buy a lot of taxable inputs. See input tax credits in Canada for details.
GST/HST and your income tax return
GST/HST is separate from income tax. You still report business revenue and expenses on form T2125, Statement of Business Activities. GST/HST you collect is not income, and GST/HST you remit is not a deductible expense; only the ITC treatment matters. For the income side of the picture, see the T2125 form explained and how to report self-employment income. This page is general information only and is not legal or tax advice; confirm your situation with the CRA or a qualified adviser.
Frequently asked questions
Do I have to charge GST if I am a sole proprietor?
Not automatically. You must charge GST/HST once you are registered, and registration becomes mandatory when you are no longer a small supplier. If your taxable supplies stay below the small-supplier threshold, you are generally not required to register or charge the tax, although you may register voluntarily if you want to claim input tax credits. Confirm the current threshold on the CRA website.
How do I know if I am a small supplier?
You are generally a small supplier while your taxable supplies stay below the threshold set by the CRA over the relevant measuring period. Taxable supplies include zero-rated items, but exempt supplies such as many health and childcare services do not count. Because the threshold and period can change, check the current figures on the CRA website and track your revenues carefully.
What happens if I do not charge GST/HST when I should?
If you are registered or required to be registered, failing to charge and remit the tax can lead to assessments, interest and penalties from the CRA. You may also have to pay the uncollected tax out of your own funds. Registering voluntarily and charging correctly from the start avoids most of these problems. Speak with the CRA or an accountant if you are behind.
Do I need to charge GST/HST on all my sales?
No. You only charge the tax on taxable supplies, which include zero-rated items at 0%. Exempt supplies, such as many health, educational and residential rent services, are not charged GST/HST and cannot be included in your taxable revenues for threshold purposes. The rate you apply depends on the place of supply and whether the province uses GST, HST or GST plus a provincial tax.