GST/HST: the four things Canadian small businesses get wrong
Registration timing, the business number on your invoices, input tax credits on personal-use items, and the quick method. Each one costs money quietly.
Sales tax in Canada is not complicated so much as it is unforgiving about detail. Four mistakes account for most of what an accountant finds when they take over a set of books, and all four are cheap to avoid and expensive to discover late.
1. Registering late
You must register once your taxable revenue passes $30,000 in a single calendar quarter or over four consecutive quarters. The trap is that the obligation starts at the moment you exceed it, not at the start of the next year — so tax you never charged is still tax you owe.
2. Leaving the business number off an invoice
A registrant charging GST or HST must show their business number on the invoice. Without it, your customer cannot claim the input tax credit — which means the first person to notice is their accountant, months later, and the invoice has to be reissued.
Worth checking
The nine-digit root of a CRA business number carries a check digit, so a transposed digit can be caught the moment it is typed rather than at year end. APX Ledger checks it as you enter it, and warns you if an invoice charges tax with no number to show against it.
3. Claiming input tax credits on personal use
If something is used partly for business and partly personally, only the business portion is claimable. Vehicles and home offices are where this goes wrong most often, and it is the sort of thing that looks like a rounding decision until it is reviewed as a pattern.
4. The quick method, chosen once and never revisited
The quick method lets you remit a flat percentage of sales instead of tracking every input tax credit. It is a good trade for a service business with few expenses and a poor one for anybody buying stock — and businesses change shape faster than they revisit the election.
None of this is advice about your particular situation. It is the list of things worth asking your accountant about, which is a different and more useful thing for a blog post to be.