Harmonized Sales Tax (HST) is collected at 13% on most goods and services sold in Ontario. As a business owner, you are both a collector of HST (charged to customers) and a claimant of HST paid on your business purchases (input tax credits). Understanding when and how to register, what to charge, and how to file your returns is essential for every new Ontario business.
When You Must Register for HST
HST registration is mandatory when your worldwide taxable revenues in a single calendar quarter, or in the last four consecutive calendar quarters, exceed $30,000. You must register within 29 days of exceeding the threshold.
- Threshold: $30,000 in taxable revenues in any single quarter OR over any four consecutive quarters
- Must register within 29 days of exceeding the threshold
- Failure to register and collect HST does not eliminate your liability — you still owe the HST you should have collected
- Taxi/rideshare drivers: must register immediately, no threshold
The $30,000 threshold counts total taxable revenues before expenses — not net profit. If you invoice $30,001 in total revenue, you are over the threshold and must register, regardless of how much you spent.
The Benefits of Voluntary Registration (Before $30,000)
You can register for HST voluntarily even if your revenues are below $30,000. Many new businesses should do this immediately — here is why.
- Claim input tax credits (ITCs) on all your business purchases from day one
- Recover HST paid on startup costs: computers, software, professional fees, rent
- Appear more established and professional to clients (especially B2B)
- Avoid having to scramble to register once you hit the threshold
New business tip: If you spent $10,000 setting up your business and paid 13% HST on those purchases, voluntary HST registration lets you claim $1,300 in ITCs immediately. Without registration, that $1,300 is simply a sunk cost.
What Is Taxable vs Exempt from HST?
Most goods and services sold in Ontario are subject to 13% HST. But there are important categories that are exempt or zero-rated — meaning you do not charge HST and may not claim all ITCs.
- Taxable at 13% (most things): consulting, retail, services, software, repairs
- Zero-rated (0% HST, but ITCs allowed): basic groceries, prescription drugs, medical devices, exports
- Exempt (no HST, no ITCs on related expenses): residential rent, most healthcare, financial services, educational services
- Mixed-use situations: if you sell both taxable and exempt supplies, you must apportion your ITCs
HST Reporting Periods and Filing Frequencies
The CRA assigns a filing frequency based on your annual taxable revenues. Most new small businesses are assigned an annual filing period, but can choose to file more frequently if preferred.
- Annual filer (revenues under $1.5M): one return per year, due 3 months after fiscal year-end
- Quarterly filer (revenues $1.5M–$6M): four returns per year
- Monthly filer (revenues over $6M): monthly returns
- You can elect to file more frequently than required — many businesses prefer quarterly to spread cash flow
Annual filer cash flow warning: If you are an annual filer, your entire year's HST owing is due at once. This can be a large lump sum. Consider setting aside the net HST collected in a separate bank account throughout the year to avoid a year-end cash crisis.
Your First HST Return: What to Prepare
Filing your HST return requires reconciling the HST collected from customers against the ITCs you are claiming on business expenses. The difference is either remitted to CRA (if you collected more than you paid) or refunded to you (if you paid more than you collected — common in early months).
- Total HST collected from clients during the period
- Total HST paid on business expenses (your ITCs)
- Net = HST owing or refund
- Keep all receipts showing HST paid — required to support ITC claims
- HST number must appear on all invoices you issue to clients
Missing HST number on invoices: Clients can only claim ITCs on purchases if your invoice includes your HST registration number. Always include your GST/HST number (format: 123456789 RT0001) on every invoice.
Key Takeaways
HST registration is a straightforward process that most Ontario businesses should complete at or before the $30,000 threshold — and many should complete voluntarily from day one. The key is to set up proper invoicing habits, keep all HST-bearing receipts, and file your returns on time. A CPA can set up your HST account, configure your invoicing, and handle annual filings as part of an integrated accounting package.
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