Commencing July 1, 2010, in Ontario, the Goods and Services Tax (GST) will blend with the provincial sales tax and become the Harmonized Sales Tax (HST) in Ontario. The new tax is set at 13%.

At the moment, a GST registered business collects the GST from the customers and pays the GST to its suppliers. At the end of the reporting period (depending on the total sales, it may be monthly, quarterly, or annually), it calculates how much GST was paid out for the purposes of generating income then subtracts the amount that was collected from the customers. If the difference is a positive amount, the business owes the Canada Revenue Agency (CRA) money, if negative, it’s entitled to a refundable input tax credit (ITC).

The rules of HST collection turn out to be the same for the GST as the new tax is designed to streamline the process of tax collection. Businesses providing taxable supplies in Canada are required to register for the HST, unless you are a small supplier as defined by the law.

To qualify as a small supplier, you need to meet one of the following conditions:

• If you are a sole proprietor, your total revenues from taxable supplies (before expenses) from all of your businesses are $30,000 or less in the last four consecutive calendar quarters and in any single calendar quarter.
• If you are a partnership or a corporation, the total revenues from taxable supplies (before expenses) of the partnership or corporation are $30,000 or less in the last four consecutive calendar quarters and in any single calendar quarter.
• If you are a public service body (charity, non-profit organization, municipality, university, public college, school authority, or hospital authority), the total revenues from taxable supplies from all of the activities of the organization are $50,000 or less in the last four consecutive calendar quarters and in any single calendar quarter. A gross revenue threshold of $250,000 also applies to charities and public institutions.

That being said, taxi and limousine operators are required to collect the GST/HST, even if they qualify as small suppliers.

PSWLaw is your lawyer for your small business.

Note: Please keep in mind that this article is provided for information and educational purposes. It does not constitute legal advice and should not be regarded as such. The law may have changed since the publication of the article.