Being a business owner means building teams, managing operations, continuous learning, and of course, the growing of your business. But when there is a growth of business and your business’ wealth, there’s a growth in tax obligations.
Now, admittedly taxes aren’t necessarily the “fun” part about running a business, especially if it’s your first-time filing business taxes or you’re not a numbers person. In fact, few Canadians, business or individual, enjoy filing their taxes so when the dreaded tax season come around, it can bring about a lot of stress and anxiety. But with the proper education that will help you understand your tax obligations, filing your tax returns will be a breeze.
Suppose you’re a business owner looking to file Canadian taxes. In that case, this helpful guide will educate you on the basics, help you understand taxation in the digital economy, and have you filing taxes like a pro in no time.
Canadian Taxes 101
Canadian GST, PST, and HST
Depending on which province or territory you are conducting your business in, you will have to deal with at least one of the three forms of taxation:
- Goods and Service Tax (GST) is a tax placed on almost all goods and services made and provided in Canada.
- Provincial Sales Tax (PST) are taxes collected by the provincial government rather than the federal government. The rules and regulations of the provincial sales tax will vary from province to province.
- Harmonized Sales Tax (HST) combines the GST and PST and is charged as one.
Whether you will be charging and remitting GST, PST, or HST will depend on what province(s) or territories your business is conducted in. Please see below for reference.
GST (5%) |
HST |
PST |
||
| British Columbia | ✔ | ✔ | ||
| Alberta | ✔ | |||
| Saskatchewan | ✔ | ✔ | ||
| Manitoba | ✔ | ✔ | ||
| Quebec | ✔ | ✔ | ||
| Ontario | ✔ | |||
| Newfoundland | ✔ | |||
| New Brunswick | ✔ | |||
| Prince Edward Island | ✔ | |||
| Nova Scotia | ✔ | |||
| Yukon | ✔ | |||
| Northwest Territories | ✔ | |||
| Nunavut | ✔ |
FNGST and FNT
Similar to the GST, the First Nations Goods and Services Tax (FNGST) is a 5% taxation applied on all taxable goods and services sold on First Nations Lands. The FNGST replaces the GST or the federal part of the HST entirely.
The First Nations Tax (FNT) is an additional 5% taxation applied on the sales of alcoholic beverages, fuel, and tobacco on First Nations Lands. The FNT is not applied to all First Nations Lands. But instead, it is only applied to some, and it is up to the band council to decide whether they will enact the bylaw or not.
Do I have to pay taxes?
All businesses in Canada who sell taxable goods and services must register for a GST/HST UNLESS you are a small supplier.
A small supplier is any sole proprietors, partnerships, or corporation that has earned a total revenue of $30,000 CAD or less in an annual period before expenses. Those who do not meet the annual $30,000 CAD threshold do not have to register to collect or remit GST/HST with the Canadian government.
If you are a sole proprietor, partnership, or corporation that had made more than $30,000 CAD in total revenue before expenses in the last four consecutive calendar quarters or made $30,000 CAD in total revenue in any single calendar quarter, then you must register for a GST/HST and remit taxes to the Canadian government.
If you are a public service body and your total revenue before expenses exceed $50,000 CAD in the last four consecutive calendar quarters or in any single calendar quarter, then you must register to collect and remit GST/HST taxes to the Canadian government. If your public service body and you do not meet the $50,000 CAD threshold, then you are considered a small supplier and do not have to collect taxes or pay remittances to the Canadian government.
Taxes for the Digital Economy
Previously, foreign digital vendors who sold to Canadians but did not have a physical presence in Canada would carry on their business without collecting GST/HST taxes from Canadian consumers, nor would they have to pay GST/HST taxes to the Canadian government. This is because the Canadian corporate tax system was created to accommodate an era of selling physical goods in brick-and-mortar shops. But with the growing digital economy, there has been a push for the corporate tax laws to be adapted to ensure that the Canadian tax system better reflects the changing economy.
In the Fall Economic Statement of 2020, the government of Canada announced that the GST/HST system will now include taxation on the digital economy.
This regulation applies to:
- Cross-border digital products and services sold to Canadian consumers, including intangible services such as downloads, streaming services, and subscriptions.
- Goods that are supplied and delivered to Canadian consumers through a fulfilment warehouse located in Canada.
- Short-term rental accommodation that is being provided through online platforms within Canada. In this instance, either the accommodation owner will register and collect the GST/HST on the accommodation, or if the accommodation owner is not registered, the operator of the online platform will be required to register and collect the GST/HST.
Taxation on the digital economy has come into effect as of July 1, 2021. Foreign vendors providing digital products or services to Canadian consumers will be obligated to register, collect, and remit GST/HST to the Canadian government so long as they are not a small supplier.
How do I register for GST/ HST?
To register for GST/HST as a business owner in Canada, you will need to get a GST/HST number from the Canadian Revenue Agency (CRA). If you are conducting business within British Columbia, Manitoba, Quebec, or Saskatchewan, you must register with the provincial agency to apply for a PST as well.
If you are a foreign digital vendor conducting business within Canada, then you will be able to register for the simplified registration regime through the CRA. This registration process allows foreign vendors to register and remit taxes to the Canadian government online.
Seshhub has partnered up with Stripe as our official payment and processing system. To access all payments, balances, and reports please refer to your Seshhub admin dashboard.
Seshhub offers general information to help merchants selling in Canada understand the Canadian tax system. However, it does not replace any information or regulation that has been set forth by the official government. To ensure that your taxes are collected, remitted, and registered correctly, consult your local authority or tax professional.
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