Few can deny that understanding the differences between GST and HST for a small business in Canada can be difficult. This is because both are sales taxes, but they are applied differently in different provinces. The GST is a Canadian federal tax attached to most goods and services, while HST is a combined federal and provincial tax.
If you’re operating a small business, you need to learn all you can about GST and HST. These taxes can affect your cash flow, bookkeeping, invoicing, and compliance obligations with the Canada Revenue Agency. At Bizfund, our team realizes that many entrepreneurs delay learning the rules because the terminology can be complex.
Yet, once you understand the framework, it becomes more manageable. In this guide, we’ll break down GST and HST for small business owners by looking at registration, rates that work across provinces, and what you can claim back. We’ll also explore how to remain compliant without facing penalties or overpaying.
Do You Need to Register?
The $30,000 Threshold
Under Canadian law, you must register for GST or HST once your company earns more than $30,000 in taxable revenue (but other rules apply for charities and public service bodies).
This revenue counts as over the threshold only if you earn it in a single calendar quarter or in four consecutive calendar quarters. In most instances, this threshold applies to sole proprietors, corporations, and partnerships, and the timing of when you must begin charging tax depends on how you exceeded the threshold.
The reason you have to register when you cross the $30,000 mark is that you’re no longer classified as a small supplier. You’ll have 29 days to register once you reach this point, and from then on, you must begin charging GST or HST on taxable supplies. If you fail to register, you could incur penalties and the obligation to remit tax you didn’t collect.
Voluntary Registration Benefits
For some businesses, it makes sense to voluntarily register for GST even if they earn less than $30,000. This is because there are several benefits you can enjoy.
For instance, you will have the ability to claim Input Tax Credits (ITCs) on your business’s expenses, and you’ll have cleaner tax reporting if you expect rapid growth. You could also improve your credibility with other businesses and make it easier to meet interprovincial sales compliance requirements.
However, the downside is that you must charge and remit tax once you register, even if your revenue later falls below the threshold. That’s why it’s important to carefully consider voluntary registration before you do it, as you don’t want to put your business in a sticky situation.
Exceptions and Special Cases
It’s important to know that in Canada, GST and HST have specific registration and compliance exceptions for certain businesses. For example, ride-sharing and taxi operators must register regardless of their revenue.
In addition, non-resident digital service providers have mandatory obligations, and public service bodies or charities must follow special rebate rules. For these reasons, it’s best to find out whether small supplier status applies to your business rather than assuming it does, as doing so can land you in hot water.
GST vs HST vs PST: Which Provinces Charge What (2026)
In 2026, different provinces in Canada charge different taxes, with some only charging GST, others only HST, and a few GST and PST. Here’s a look at what you need to know:
GST (5%) Only Provinces and Territories
- Alberta
- Northwest Territories
- Nunavut
- Yukon
HST Provinces (Combined Federal + Provincial Rate):
- Ontario (13%)
- Nova Scotia (14%)
- New Brunswick (15%)
- Newfoundland and Labrador (15%)
- Prince Edward Island (15%)
GST + PST Provinces (Separate Systems):
- British Columbia (GST 5% + PST 7%)
- Saskatchewan (GST 5% + PST 6%)
- Manitoba (GST 5% + PST 7%)
- Quebec (GST 5% + QST 9.975% administered separately)
If you operate across provinces, the tax rate charged depends on the customer’s location, not your business address.
How Rates Work Across Canada
Rates are fairly predictable for GST and HST for a small business in Canada. In most situations, you’ll charge tax under the place-of-supplies rules. For example, if you sell physical goods, this is usually where you deliver the product.
Unfortunately, rules for services and digital products can be more complicated. And you might not want to hear it, but as of February 2025, the CRA is showing a huge focus on interprovincial ecommerce compliance. So if you sell online, it’s incredibly important to carefully review the place-of-supply rules.
Collecting GST/HST
What’s Taxable and What’s Exempt
When collecting GST or HST, it’s important to also know what’s taxable and what’s exempt. In Canada, most goods and services are taxable at the standard rate. However, here are the three main categories surrounding what can be collected on and what cannot:
- Taxable (standard rate): Most goods and services.
- Zero-rated (0%): Basic groceries, certain medical devices, exports.
- Exempt: Residential rent, many financial services, most health and educational services.
You also need to know the difference between zero-rated and exempt matters, because you can claim ITCs on zero-rated supplies but not on exempt supplies.
How to Show It on Invoices
As a small business, it is your responsibility to show that you’re collecting either GST or HST from suppliers. To do this, you need to clearly display the following on your invoices:
- Your business name
- GST/HST registration number
- Invoice date
- Total before tax
- Applicable GST/HST rate
- Tax amount charged
- Total payable
You also need to know that for all invoices over $150, you may be required to provide additional information, such as customer identification. It might seem like a hassle to include all this information, but proper invoicing will help ensure audit readiness and protect your ITC claims.
Point of Sale Requirements
There are many point-of-sale (POS) requirements, especially for hospitality, retail, and other customer-facing environments. If you operate in this space, your POS needs to automatically apply the correct provincial tax rate, generate receipts that show the applicable HST or GST, and distinguish between taxable and exempt items.
Your receipts also need to show your business name, the amount before tax, your GST or HST registration numbers, the tax rate you applied, and the total tax collected. Unfortunately, if you slip up on your receipts, it can cause your company severe auditing issues and may even affect your ability to support ITC claims.
Another POS requirement, according to the CRA, is that you must maintain sales records for at least six years. Fortunately, as of 2025, digital recordkeeping is fully acceptable if your records are complete, accessible, and backed up, such as in a cloud-based system.
Input Tax Credits (ITCs)
ITCs are hugely beneficial as they allow you to recover GST or HST paid on eligible business expenses. For this reason, ITCs help many small businesses reduce overall tax burdens and improve cash flow. Let’s have a look at what you can claim back, the documentation you need, and common ITC errors to avoid:
What You Can Claim Back
Usually, your small business can claim ITCs on GST/HST paid for any expenses you made to earn taxable income. Usually, this means you can claim office supplies, inventory, commercial rent, equipment, utilities, professional fees, and certain vehicle expenses.
However, you need to be cautious if you operate within the healthcare, financial, or education sectors. Often, businesses in these sectors provide exempt supplies, and they may not be eligible to claim ITCs for those activities.
Documentation Requirements
To support your ITC claims, you need proper documentation. At a minimum, your records should include:
- Supplier name
- Invoice date
- Amount paid
- GST/HST charged
- Supplier’s registration number
If your documents don’t show this information, the CRA may deny your claim even if your expenses were legitimate, so this is something you want to avoid encountering.
Common ITC Errors
You don’t want to make ITC errors as they often lead to claim denials. In many situations, the most common mistakes businesses make are claiming personal expenses, failing to properly separate taxable and exempt activities, and missing claim deadlines.
Usually, the best way to avoid making these mistakes is to keep your personal and business expenses strictly separate. If you do this, you’ll avoid audit risks and simplify reporting.
Filing and Payment
After you’ve registered, you need to file GST/HST returns and remit any taxes you owe. How often you have to pay taxes will depend on how much you earn annually. For example, if your business earns $1.5 million or less, you’ll typically file annually, but if you earn between $1.5 and $6 million, you’ll file quarterly in most situations.
In addition, those who earn more than $6 million a year generally have to file monthly. It’s also worth noting that you may be able to file more often to improve your cash flow management. Moreover, your returns are due one month after the end of the reporting period if you’re a monthly or quarterly filer, and annual filers usually have a three-month filing deadline.
If you miss the deadline, you could face penalties and compound daily interest, and this can add up quickly to an amount you very likely don’t want to pay.
Quick Method vs Regular Method
When it comes to filing, your business can choose between the quick method of accounting for GST/HST or the regular method. If eligible, under the quick method, you can collect GST/HST from customers as usual, but remit a reduced percentage of your revenue. You would do this instead of tracking individual ITCs.
Although the quick method simplifies bookkeeping, it isn’t always beneficial. In some industries with high input costs, it’s usually better to use the regular method, as it can result in lower overall remittance obligations.
However, regardless of the accounting method you choose, GST/HST collected isn’t business income, and you must remit it on schedule. If your company’s revenue is strong but cash flow is tight due to receivable delays or growth-related expenses, a merchant cash advance can help you responsibly bridge the gap.
Common GST/HST Compliance Red Flags
The reality is that even experienced businesses can encounter issues when compliance falls behind operational growth. It’s important that you watch out for these warning signs if you want to avoid negative encounters with the CRA:
- Your revenue is approaching or exceeding the $30,000 threshold, and you aren’t registered.
- Your ITC claims are lacking proper supplier documentation.
- Your business is charging incorrect interprovincial tax rates.
- You’re blurring the line between personal and business expenses.
- Your company is treating zero-rated and exempt supplies as the same.
If any of the above apply to your small business, it’s time to review your reporting system or to seek professional advice.
Getting Help
When to Hire an Accountant
Many small businesses can indeed handle their own GST/HST needs in the early stages, but as revenue grows or the company expands, complexity increases. If you’re unsure when you should seek professional guidance, here’s when we recommend hiring an accountant:
- When you operate in multiple provinces.
- Your company offers a mix of taxable and exempt services.
- You sell digital goods or services across Canada.
- Your business imports or exports products.
- When you are unsure about the place-of-supply rules.
- Your business is facing a CRA review or audit.
CRA Resources Available
Hopefully, the information we shared offers you better insight into GST/HST for small businesses. If you’re still a little confused, the CRA has resources available. The CRA provides small businesses with detailed guidance through its website, online registration portals, My Business Account services, and GST/HST memoranda. All of these tools can help you understand due dates and filing obligations.
However, CRA resources only explain legislation and don’t offer business-specific tax planning advice. So, if you would like insights into financial planning, you might want to review our past guide on tax deductions for small businesses. You may also want to read our article on starting a business in Alberta if you’re preparing to launch operations in this province and want to be compliant from the beginning.
Key Takeaways to Stay Compliant and Save Money
It’s especially important for a small business in Canada to understand GST and HST, as they are key concepts in operating a compliant, financially healthy company. Now that you know when to register, which provincial rate applies, how to claim ITCs correctly, and meet filing deadlines, you’re on a better footing to protect cash flow and avoid unnecessary penalties.
However, just remember that the GST and HST you collect aren’t business income and must be set aside and remitted on schedule, even during periods of seasonal fluctuation or growth. If you are experiencing short-term liquidity pressure, expanding, or managing interprovincial sales, it is essential to plan ahead.
At Bizfund, we can help with that by offering merchant cash advance solutions that provide flexible working capital to help you stay compliant. You can apply here when you’re ready.
