When starting a business or planning where to live in Canada you may question how Canadian tax differs from province to province. This article serves the purpose of evaluating commonly asked questions regarding Ontario tax rates including:

• when you should collect sales tax in Ontario, how the sales tax is calculated
• who is exempt from Ontario sales tax
• how to pay sales tax to the CRA alongside how to register for a sales tax number upon qualification.

Provincial and federal taxes serve the purpose of supplying Canadians with a wide range of services and benefits including paying for roads and highways, healthcare, hospitals, education, social services, and provincial parks.

When should I collect sales tax in Ontario?

When starting a company or personal business you may begin to question how you should charge sales tax to adhere to federal and provincial laws in accordance with sales. Taxable items can extend from physical items to properties and even digitalized goods.

When evaluating if you need to be applying HST to the goods you are selling it is important to recognize that taxable goods and services should exceed $30,000 in revenue in a single calendar year before qualifying for HST. This applies to service providers and property providers regardless of taxable service.

The total taxable revenue should exceed CAD 30,000 in a single calendar quarter or four separate consecutive calendar quarters. If you are selling wholesale to another business this does not make you tax exempt, but instead, it is the responsibility of the business you are selling, to claim the tax credit on their purchases from your wholesale company.

You may also choose to voluntary charge HST on taxable goods without having a revenue exceeding $30,000. In such a case you will need to immediately register for an HST account before actually charging the taxes.

When evaluating if your company has exceeded the CAD 30,000, required to apply HST in Ontario, you must evaluate the total revenue of the company. This is the total revenue of your business before subtracting expenses.

How are sales taxes calculated in Ontario?

In Ontario, Canada the province charges a Harmonized Sales Tax (HST) of 13%. This accounts for the federal government collection of GST, at the rate of 5%, and the provincial departments’ charge of 8% on taxable supplies. These together generate the HST of 13% for the entire province of Ontario for taxable goods and services.

Some provinces follow the same method as Ontario while other provinces keep their taxes separated into GST and PST. All provinces are required to apply the 5% federal tax on taxable services, but the provincial tax rate may vary. For example, Saskatchewan utilizes the application of GST (5%) and PST (6%). The Maritimes have the highest HST with all maritime provinces reaching an HST of 15% in comparison to Ontario’s 13%.

The HST is applied to taxable items for example when purchasing a taxable item, it may be listed as $20.99 plus tax. So, upon purchasing this item the HST would take federal tax of 5% plus the provincial tax of 8% from the $20.99 listed item, this would accumulate to $2.73 in taxes owed and would result in the items total price being $23.72.

Who is sales tax exempt in Ontario?

First Nations individuals with a status card, bands, and band councils of an Ontario First Nations reserve are able to rebate from paying the 8% portion of Ontario’s HST. There are additional items that fall under a point of sale rebate which ensures customers do not have to pay the 8% of the HST tax portion on items such as books and children’s supplies including children’s footwear and clothing. These exemptions also extend to feminine hygiene products, car seats, diapers, and booster seats.

How to pay sales tax to CRA?

With the world becoming more digitalized it has made the process of paying taxes to the CRA simpler and quicker. You can pay using the CRA website and My Payment, the CRA website and pre-authorized debit, or directly using online banking.

CRA Website and My Payment:

You will need to first have a ‘My Payment’ electronic service account and an Interac debit, visa debit, or debit MasterCard to use this service. The CRA will not charge any additional fees for using this service unless the payment is made overdue. After going to ‘My Payment’ you must have a 15-digit CRA program account number. Following the insert of this number, you will be prompted with a clear set of steps on your screen allowing you to pay the tax owed to the CRA.

CRA website and pre-authorized debit:

To utilize this service on the CRA website you will need a ‘My Business Account’ to set up the pre-authorized debit. This requires you to agree with the CRA to withdraw a pre-determined amount from your bank account to pay tax on specific dates.

Paying using Online Banking:

The first step of paying the taxes to the CRA with your bank account includes signing into your financial institution’s online banking service and under ‘add a payee’ there are options that include, Federal Corporate Tax Payments, Federal GST/HST return, etc. After choosing the appropriate payee you will enter your account number and can pay taxes directly to the CRA through your bank account.

How to register for a sales tax number in Ontario?

To attain an HST number you can utilize the CRA website where you will be prompted to register for a GST/HST account. You will receive both a business number and an HST number if you previously did not have one. You can register online, by mail/fax, or by phone. After completion of registration and attaining your HST and business number you can charge HST on sales and complete your HST return alongside remitting the tax collected.

When planning to register for an HST number you should ensure you do so no later than the beginning of the month that considers you no longer a small supplier business. Once registered you must begin charging HST on all services provided. It is important to keep track of your taxes charged with each sale and save the total HST collected in order to have the desired amount accountable for when taxes are collected.

Where can I file and remit HST return?

Your HST return can be filed online or electronically, by TELEFILE, or on paper. There are a exceptions to this rule though. Businesses such as builders and those that make over 1.5 millions and are not a charity have to fill electronically.

Those looking to fill their HST return can do so using the following resources:

Online

Netfile: GST/HST NETFILE is a service that allows registrants to file their GST/HST returns and eligible rebates directly to the Canada Revenue Agency (CRA) over the internet.

My Business Account: My Business Account is a secure portal for business owners to use and view their business and tax information online. It also allows you to communicate with CRA regarding multiply business accounts including corporate taxes and payroll as well. My Business Account has a HST/GST module that allows you to file your HST/GST taxes, directly on the website.

Represent a client: Represent a Client is a secure service that allows others such as bookkeepers and accountants and employees to access tax information on your behalf. Users are able to see your CRA account and perform actions such as filing taxes, responding to queries, and viewing account balances. Business owners have the option of limiting the amount of information that others are allowed to view on their account.

Electronic Data Interchange (EDI): GST/HST EDI lets you pay the net tax you owe electronically through a participating Canadian financial institution. Think of this as paying you taxes using online banking.

Telefile

GST/HST TELEFILE: The CRA also allows you to file GST/HST via telephone and a toll-free number with Telefile. GST/HST Telefile is a fast, free. This service is to eligible individuals with a lower or fixed income.

GST/HST Internet File Transfer: GST/HST Internet file transfer is a service that allows eligible registrants to file their GST/HST returns directly to the CRA over the internet using their third-party accounting software. CRA has a list of certified software that allows eligible uses to file their HST/GST return.

Here are some of the best software to file HST GST:

• Intuit QuickBooks Financial Software
• Sage 50, Sage X3, Sage Business Cloud Accounting
• AgExpert Accounting
• Business Central – Microsoft Dynamics 365 GP, NAV
• ESILAW
• NetSuite OneWorld, NetSuite Financials, NetSuite Inc.
• Blue Link ERP
• SAP Business ByDesign
• InstantHST

Paper filing

If you are not required to file online, you can file your HST return as a paper return. Note that you have to meeting eligible requirements to file by paper. If you can file electronically and file by paper, you will be charged penalties for doing so.

To file HST by paper you must use forms GST34-2 or GST62. These forms must be order online through your CRA My Business, Rep-a-client or My Account portals. You can also order them via telephone.

Once the forms are completed, you can mail them to the address on your return, or file in person at a participating financial institution.

You cannot file in person at a participating financial institution if:

• you are claiming a refund
• you are filing a nil return
• you offset the amount owing on your return with a rebate or refund

Each fiscal year the CRA will mails you personalized HST packages to file your returns by paper if eligible.

This packages also includes an access code which can be used to file returns electronically if you choose to do so. If you file electronically and make 2 consequently payments electronically, the CRA will stop sending you the packages unless you request one.

When do I file my GST/HST return?

Once you are registered for a GST / HST number, CRA will mail you a letter which includes the date you are expected to file your return. Typically most businesses are required to file taxes once a year. It is not often that businesses are required to file more than once a year unless they make a lot of money in revenue. If you are asked to file multiple times per year, you may opt to change the frequently.

If you are a sole proprietor, the deadline for filing your GST/HST return is usually 3 months after the end of the year.

Corporations typically have the same fiscal year-end for both income tax and GST/HST purposes and must adhere to these deadlines for filing their taxes. A corporation can change their GST/HST filing date to be different from the fiscal year but they need CRA’s permission to do so. For corporation with calendar fiscal year-end (i.e. December 31st), their GST/HST return must be filed by June 15th of the following year and payments must be made by April 30th of the following year.

If your corporation has a non-calendar fiscal year-end (i.e. a date other than December 31st), then the GST/HST return must be filed and paid three months following your fiscal year-end.

While most corporations file their GST/HST return on an annual basis, others file more frequently, such as monthly or quarterly. Those who are require to file at a frequency that is less than 1 year, must file their taxes a month after the GST HST period end date.

How to file a tax return

Once you’ve registered for your GST or HST number, confirmed the due dates for your return, and any payments you might owe, you can start completing the GST/HST return.

The paperwork the CRA will send you includes two parts:

• A “working copy” of your GST/HST return, which allows you to work through all of the required calculations (yours to keep for records)
• ThSamuel.Dwomohludes the information you need to submit to the CRA

On the working copy, you enter the following information:

• Total sales and other revenue
• Total tax you’ve collected
• Total tax you’ve paid
• Any other credits or debits

After you’ve completed these steps, you’ll be able to calculate if you are owed a refund or if you need to pay the CRA.

What happens if you don’t file or pay a GST/HST return on time?

If you don’t file your GST/HST return on time, you will incur late charges with interest. According to the CRA, a late penalty of $250 is issued if you receive a demand to file and do not do so, and there are also penalty fees for filing incorrectly.

How can I track sales tax in Ontario?

Tracking sales taxes with a software makes it easier for you to collect and remit accurate tax amounts to the government. In Canada, there are making accounting softwares that allow you to track sales taxes accurately.

Here are some of the best softwares to help you track collected sales taxes:

• Quickbooks
• Freshbooks
• Xero
• Sage50

These softwares have modules that allow you to select province specific tax requirements and will help you generate reports to file your taxes.