Top 5 GST/HST Mistakes (and How to Avoid Them)

Whether you have just started your business venture or have a couple of years under your belt, navigating GST/HST can be confusing and stressful. There’s is lots of information on the internet but hard to know if it is trustworthy or comprehensive. Consequently, it's easy to make mistakes that results in time wasted or worse, unnecessary interest, penalties and letters from the government. From registration errors to missed deadlines, you can avoid these mistakes with the right knowledge.

In this post, I'll walk you through the five most frequent GST/HST mistakes I’ve seen (in my fairly extensive experience as a small business accountant) and share some tips on how to avoid them.

Related Post: FAQs about GST/HST

For the video version, see below:

Mistake 1: Not Registering for GST/HST on Time

One of the biggest mistakes solopreneurs/business owners make is that they wait too long to register for GST/HST (and QST). They might assume that their sales do not exceed the threshold or they aren’t exactly sure how the calculation works. It can be easy to put it off until its too late .

How to Avoid It:
If your taxable revenue exceeds $30,000 in any four consecutive calendar quarters, you're required to register for GST/HST. Even if you’re below that threshold, it still might make sense to register, as it allows you to claim input tax credits i.e. taxes paid on purchases.

Mistake 2: Incorrectly Calculating How Much GST/HST Is Owed

Ensuring that you correctly calculate the correct amount of GST/HST might be challenging, especially if you have customers in multiple provinces or if some of your sales are not taxable. Consequently, you might end up either undercharging or overcharging your customers.

How to Avoid It:
Ensure you use the correct GST/HST rate based on the province of your customer, rather than where your business is located. E.g. if you and your business are located in B.C. and you are charging an Ontario customer, the rate would be the Ontario rate of 13% HST rather than the 5% in B.C.

Mistake 3: Not Claiming Input Tax Credits

Input tax credits (ITCs) are essentially the taxes you pay on your business expenses and can be offset against your gst/hst collected from customers. Many solopreneurs/business owners forget to claim them, thereby missing out on a simple way to reduce their taxes.

How to Avoid It:
It is important to track all of the GST/HST you pay on eligible business expenses. You can use accounting software or a spreadsheet to track your business related transactions which will help ensure that you claim these amounts when filing your return. Also, don’t forget to keep your receipts in case of audit and for your own reference.

Mistake 4: Missing Filing Deadlines

Filing your GST/HST returns late can result in penalties and interest which are a) completely unnecessary and b) can add up quickly especially given higher interest rates. You might miss deadlines due to a lack of organization or if you aren’t sure about how often you need to file

How to Avoid It:
Know your filing deadlines and reflect them on your calendar (even if you are outsourcing your taxes to an accountant). You can determine your filing deadlines either by referring to letters that you would have received from Revenue Canada or by going to CRA My business account (which I highly recommend signing up for). GST/HST filing can be annual, quarterly or monthly depending on your revenues and what filing period you chose when you signed up.

Mistake 5: Not Charging GST/HST Even Though You Are Registered

It is a somewhat common misconception that, for those who are already registered for sales tax, if your sales are lower than the threshold of $30k in a year, you do not have to charge GST/HST. This can lead to audits from CRA when you file your returns.

How to Avoid It:

If you are registered for sales tax, even if your business is largely inactive or you only have a few dollars of sales, you still have to charge GST/HST. The only way to stop charging sales taxes is to de-register your GST/HST.

Conclusion:

If you have made any of these mistakes, know that you are not alone. It can be difficult to wear the many hats of managing a business and stay on top of your tax obligations. Once you are made aware of it, however, putting some processes in place to avoid them can save you a great deal of stress, time, money and deeply unpleasant government notices.

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