HST a comprehensive Overview

HST is a topic that many entrepreneurs are interested in learning more about, and it's confusing for them. Our host will talk about HST in this new episode of the Numetrica Accounting and Business Podcast. What is HST? HST is a service tax that we charge for our services and products. The number one thing you need to know is there's a threshold. If you ever go over $30,000 in your invoices or product sales, you have to charge HST. Whenever you're registered, you have no choice. Even if you make no sales, you have to report your HST. If you were a startup, you probably paid for some services that you needed to operate your business or open your business. You paid professionals like lawyers, accountants, and you bought equipment. You will get those HST back. The HST that you have paid out is the ITC portion. If you had sent an invoice for $1000, there was $130 of HST. Before your sales were $1,000, your sales were $1130 because that 130 you are not eligible to either pay or collect becomes income—same with your expenses. You paid someone $1,000 for their service, and there was an HST on that. So before, your expense was $1000, but because you were not allowed to pay, your HST becomes $1130. It's extremely important in your business to pay attention to your HST, your payroll, and your business numbers. Examination What they need from you is your ten highest invoices, which you would send to them, your GL listing, that's the list of every HST that you've collected or paid. You get this from your accounting software, and when they review this, hopefully, everything is good, everything matches, everything ties in, they're all legit, so you get your refund. Cash Flows One of the things that I advise clients to set up a savings account. Most banks notice and call it a trust account because you want to park their money there. And the way CRA looks at HST, they would say this is not your money, and this is the money you're collecting on behalf of us. Many people look at that HST as I sent the bill for $1000 and I got $130 HST so my income is $1130. No, your income is $1000. That HST belongs to the federal government or provinces because HST means Harmonized Sales Tax. So the mixed GST and HST portions are provincial, and a portion of it is federal. Register for HST Whenever you register for HST, you get letters from CRA. They’ll say thank you for the registry, this is your HST, this is your filing period, and these are your codes. They give you four-digit codes, you put in the four-digit code, and you can file it. HST could be “I just want to make a payment.” The other one is, I'm going to file my HST and I'd make a payment, or one of them would say, I want to make airier payments. The other one is GST payment only, and this basically means this is current, or you could even sit as installments. The other one is HST Return Payment. With this one, you can file and make payments. You probably get three pages of options because there are so many things that corporations can pay to CRA. “Am I supposed to charge HST on this or not?” You can call number 1-800-959-8287. An experienced CRA HST staff answers this, and they're very knowledgeable. You ask them a question; they give you the answer right away because they're the experts in HST. Two methods for HST There's the quick method of HST and the standard or accounting method of HST. Some companies should file on quick method, mostly IT consultants. On the quick method, it says, "I have a few small expenses, but I'm not going to calculate all of this HST." So the CRA will tell you that whatever HST you have is no longer eligible for an ITC. We get 88 percent of the HSC that you collect. You can only claim an ITC if you purchase a capital asset. https://www.numetricacity.ca/