The purpose of an HST number is to allow you to track the taxes collected on your goods and services; taxes that you may have to pay to the Canadian government.
HST means Harmonized Sales Tax. It is the tax that should be collected on all goods and services provided in Ontario, and currently, this equals 13% of the cost of the good or service.
So do you need an HST number? If you’re making less than $30,000 in sales, you don’t need an HST number. If you’re making more than $30,000 in sales you need an HST number.
Get An HST Number if You're Making $30,000 in sales
So now you’re asking, “how am I supposed to know if I’m going to make $30,000 in my first year of business?!” Of course you plan to make $30,000 and so much more. You’re not going to know for sure what your profits will look like, but if you’re starting a business you’re already familiar with taking risks.
We advise against taking the risk of hiding your profits from the government. All your ingenuity should be spent on growing your business, not playing games with the government when they always get ‘their’ cut, and then charge your penalties and interest on top of their cut. Also, whether or not you actually collect the HST is irrelevant when the government decides you need to pay them the HST. You’re better off collecting and giving it to them than taking it out of your profits to pay to them.
How Optimistic Or Realistic Are Your Plans For Your First Year Of Business?
The best way to make an educated guess is to conduct some industry research into what other companies like you make in their first year. Have you built a business plan? If not, consider doing so, as this will allow you and potential investors to understand your growth possibilities, which will then help you answer the question of whether $30,000 is feasible in your first year.
You could also contact entrepreneurs with a similar business to yours (which you should do anyway) and ask them how much one expects to make in their first year of business. If you have an accountant that has dealt with similar businesses to yours, they can tell you. If your accountant hasn’t dealt with a similar businesses to yours, they can help you keep track of your sales and tell you when to get an HST number.
When you decide to get an HST number, the beauty is that it takes less than 5minutes. Just call the Canada Revenue Agency’s Business line at 1-800-959-5525 or go to CRA Online for more business information, and ask them for one. They’ll give it to you on the spot and you’re done!
Of course where Always Law is handling your business incorporation, we'll take care of questions and steps like these for you. We'll even help you understand what HST means for your taxes, and how having an HST number can actually benefit you. However, until you're ready for a lawyer, go-getters like you still deserve to have your legal needs made easy with posts like these to take your business to the next level.