Reasons to Register for GST/HST (for businesses that have sales less than $30k)

  1. The primary benefit of registering for sales tax is that it allows your business to claim back 100% of GST/HST and QST that you have incurred on business related expenses. This is particularly helpful to startups and businesses that have high up front costs such as computers and equipment as well as rent, office expenses, travel etc.. Many such businesses have no sales in the beginning and the recovery of sales taxes can be particularly helpful to cash flow.
  2. Not being registered for sales can communicate to your clients that you are small and by extension might imply a lack of professionalism.
  3. If you expect that your sales will exceed the threshold of $30,000 in the future, you will be required to register which will result in up to a 15% increase in the price of your goods or services. This can be a significant increase and might have an impact on sales.
  4. Since clients/customers expect to pay sales taxes anyway, it is rarely a deal breaker. Also, if your customers are primarily businesses, it has no real impact on their bottom line as they are able to claim back their businesses related sales taxes as well.
  5. Businesses have the option to register for the Quick Method of reporting GST/HST (and QST) which allows them to simplify their method of calculating GST/HST collected (rather than having to track each individual sale and expense). The remittance to the government is at a lower rate than what is actually charged to the customer . the tradeoff is that you are not permitted to claim tax paid on expenses. For example if you are a service based business that charges 5% GST, you only have to remit 3.6% of this back to the government. This can increase your profit and cash flow for businesses who have low expenses.