The Complete Guide to HST Payments for Canadian Small Businesses (2024)
Introduction to HST for Canadian Businesses
The Harmonized Sales Tax (HST) is a consumption tax thatcombines the federal Goods and Services Tax (GST) and provincial sales tax (PST) into one tax. It applies in five provinces: Ontario, Nova Scotia,New Brunswick, Newfoundland and Labrador, and Prince Edward Island. This guide will cover everything a small business owner needs to know about HST—from registration to compliance, payment methods, and penalties.
What is HST?
HST simplifies the tax system by consolidating GST and provincial taxes into one rate, making compliance easier for businesses operating in these provinces. The HST rate varies by province:
Ontario: 13%
New Brunswick, Nova Scotia, Newfoundland, PEI: 15%
Small businesses must understand which of their goods and services are subject to HST, which are exempt, and which are zero-rated (taxed at 0%) to avoid mistakes when invoicing customers and filing returns (majority have HST).
Who Needs to Register for HST?
Any business operating in a province with HST must register if:
1. Annual revenue exceeds $30,000 over four consecutivequarters.
2. Special rules apply to non-profits and charities (which may have different registration thresholds).
Businesses can register:
Online via CRA’s Business Registration Online (BRO)portal
By phone, mail, or fax through the CRA
Once registered, the business will receive an HST number—essential for invoices and payments.
Filing Periods and Payment Schedules for HST
The CRA allows businesses to choose a filing period based on their size and cash flow needs:
1. Monthly Filers: Ideal for businesses with high revenue and cash flow.
2. Quarterly Filers: Most small businesses use this option.
3. Annual Filers: Common for sole proprietors andbusinesses with less than $1.5M in annual revenue.
Each filing period has a payment deadline one month after the end of the reporting period:
- Monthly: July payments are due August 31.
- Quarterly: Q1 payments (Jan-Mar) are due by April 30.
- Annual: For calendar year filers, payment is due by June 30 of the following year
How to Calculate HST Remittance Using ITCs
The HST amount due is the difference between HST collectedfrom customers and Input Tax Credits (ITCs). ITCs allow businesses to recover the HST they paid on eligible expenses, such as supplies, rent, and utilities.
Example:
- HST collected from customers: $13,000
- HST paid on expenses (ITCs): $4,000
- HST owed to CRA: $13,000 - $4,000 = $9,000
How to Pay HST: Available Payment Methods
1. Online Payment: Use CRA’s My Payment or your financial institution’s online banking.
2. Pre-Authorized Debit (PAD): Automate payments toavoid missed deadlines.
3. Telephone Banking: Make payments using your bank’sphone service.
4. In-Person Payments: Available at banks withremittance form RC158.
5. By Mail: Cheques must be made out to the Receiver General of Canada.
Note: Payments exceeding $50,000 must be madeelectronically or at a bank.
HST Installments for Small Businesses
If a business’s annual HST liability exceeds $3,000, the CRA requires quarterly installments. This option helps businesses manage cash flow and avoid paying large lump sums at the end of the year.
Installment Deadlines:
- Q1: April 30
- Q2: July 31
- Q3: October 31
- Q4: January 31
Failure to make installment payments on time can result in interest charges.
Penalties and Interest on Late HST Payments
The CRA imposes penalties for:
- Late filing of HST returns
- Late payment of HST amounts owed
The penalty formula is:
1% of the amount owed + 25% of 1% for each full monthoverdue (up to 12 months).
Example:
If $10,000 is overdue by 6 months:
- 1% of $10,000 = $100
- 25% of $100 × 6 months = $150
- Total Penalty: $250
The CRA also charges interest at the 90-day Treasury bill rate + 4% until the amount is paid.
Deferrals and Payment Arrangements
If your business faces financial difficulties, the CRA may offer:
1. Payment Deferrals: Available during economic crises (e.g., COVID-19).
2. Payment Arrangements: Allows businesses to pay ininstallments over time.
You must contact the CRA to negotiate a custom payment plan. Failure to comply with the agreed schedule may result in additional penalties.
Closing or Changing an HST Account
To close your HST account, you’ll need:
- Business number and legal name
- Cancellation date
- Reason for closure
Complete Form RC145 and submit it to the CRA. Any outstanding HST must be settled before closure.
Best Practices for HST Compliance
1. Set up automated payments: Avoid missed deadlineswith pre-authorized debit.
2. Keep accurate records: Track HST collected and ITCsto simplify filing.
3. Consult professionals: Use accounting services toensure compliance.
4. Use installment payments: Spread large payments tomanage cash flow efficiently.
Frequently Asked Questions (FAQ)
1. Can I claim HST on exempt supplies?
No, ITCs cannot be claimed on exempt supplies like residential rent or healthcare services.
2. What happens if I file HST returns late?
You’ll incur penalties and interest charges on unpaidamounts until resolved.
3. Can I remit HST payments by mail?
Yes, but large payments (over $50,000) must be made electronically or at a financial institution.
4. How do I change my filing frequency?
You can request a change through CRA My BusinessAccount, but approval depends on your revenue size.
Conclusion: Simplify HST Management with Expert Help
Managing HST payments effectively ensures your businessavoids unnecessary penalties and stays compliant with CRA regulations. From registration to installment payments, understanding the rules and deadlines helps small businesses thrive.
Need help with HST payments? ActgBots offers expert services tailored to small-medium sized Ontario based businesses, ensuring accurate filing and on-time payments.
