Tax, without guessing

The area people most want to skip, and the one with the least forgiving consequences. This is general information, not advice — confirm your own position with an accountant.

GST and HST

Canada charges federal sales tax on most goods and services. Depending on the province it is GST at 5%, or HST at a combined rate — 13% in Ontario, 15% in the Atlantic provinces.

The small supplier threshold. You generally must register once your worldwide taxable revenue passes $30,000 in a single calendar quarter or over four consecutive quarters. Below that you may register voluntarily.

Voluntary registration is often worth it. Registering lets you claim back the tax you pay on business purchases — tools, materials, software, subscriptions. For a business with real expenses that can outweigh the paperwork. For a business selling mostly to other businesses it is close to free, since your customers claim it back themselves. If you sell to consumers, it makes you 5% more expensive. Worth an accountant's opinion.

Which province's rate? Broadly, the rate is the one where the customer is — the "place of supply" rules. Selling to an Ontario customer generally means 13% HST, not your local rate. This is exactly why letting the software work it out is worth doing.

PST in British Columbia

BC charges its own 7% provincial sales tax on top of GST. It has separate registration, separate returns and different rules about what is taxable — many services are exempt from PST while goods are not. Saskatchewan, Manitoba and Quebec each have their own provincial systems with their own rules.

If you are selling in BC, confirm what applies to your specific offering. This is the most common place small businesses get it wrong.

Digital products and services

A file or an online service is taxable in the same way physical goods are. There is no exemption for being digital, which surprises people regularly.

If you sell across borders, more rules arrive. Get advice before you rely on anything.

Letting the software do it

Stripe Tax and its equivalents work out the right rate from the customer's location and add it at checkout. It costs a small percentage per transaction and it is worth it, because the alternative is you maintaining rate tables.

Two things it does not do: register you, and file your returns. Those are still yours.

Two decisions to make deliberately:

• Tax-inclusive or tax-exclusive pricing. Inclusive means the listed price is the total. Exclusive means tax is added at checkout. Business-to-business usually quotes exclusive; consumer sales often show inclusive because a price that grows at the last step loses sales. Either is fine. Say which on the page.
• Charging before you are registered. Do not. Collecting tax you are not registered to collect is a genuine problem.

Records

Keep everything: what you sold, to whom, where they were, what tax you charged, what you paid in fees. Your processor exports all of it. Connect it to your accounting software early — Stripe integrates with QuickBooks, Xero and Wave — and reconcile monthly rather than in April.

Fees are an expense, and the money that lands in your bank is net of them. A $500 sale arrives as about $485. Recording the $485 as your revenue understates income and overstates nothing; record the gross and the fee separately.

What to do now

• Work out whether you must register, or want to.
• Find out what applies in your province, for your offering.
• Decide inclusive or exclusive, and say so on the page.
• Connect your processor to your accounting software.