4 Reasons Why You Need to Register For GST/HST Early

If you’re a Canadian maker or creator who wants to understand more about registering for a GST/HST account, you, my friend, are in the right place. 

Before I discovered the benefits of voluntarily registering for GST/HST, I struggled with being taken seriously as a business owner. 

While I myself am not a maker by trade, I am a business owner and I experience many of the same challenges. In the early days, I didn’t register for an HST account because I was more focused on growing my client base and implementing the initial systems I needed to get the business going. Getting myself an HST account before I hit the $30,000 sales threshold felt like One More Thing To Do in a sea of Things To Do, and as a one-human show I needed to be really choosy about how I spent my time and energy.

The majority of my work is with other business owners, so naturally I met a lot of people who knew that I wasn’t making a whole lot of money yet because they weren’t seeing any HST on their invoices. Unfortunately, there were a few people who tried to take advantage of me — thinking they could bully me into scope creep and low rates because I was new in business.

That sucked. But worse than that were the potential clients who went elsewhere because they were looking for a long-term business relationship. Apparently, my lack of an HST line in my invoice sent a message to them that I wasn’t all that serious about my business and I might not keep the doors open for very long.

On the other hand, as a new business owner, I was also attracting newer business owners — partly because of where I was networking and partly because I was charging low introductory rates. As they grew, they eventually needed to register for HST accounts, and they had a lot of questions about what that meant for them and their businesses. 

When I realized how many other people were also struggling with registering for GST/HST — and the pros and cons of registering early — I knew I had to find a way to help them. 

If you’re not yet making the $30,000 sales threshold but want to know if registering for GST/HST early is for you, then hopefully this article will help you, too.

So without further ado… here are 11 reasons why your business needs to voluntarily register for a GST/HST account! 

Reason #1: You’re Going to Have to Eventually, Anyway 

Unless you know for an absolute fact you’re never going to exceed $30,000 CAD in global sales in a 12-month period — and unless you’re in an industry that’s exempt — you’re going to have to get a GST/HST account eventually. One of my reasons for not registering early was being too busy. I figured I’d just get around to it when I actually hit the threshold.

So here’s the thing. I’m sure you know where I’m going with this. 🤣

As a business owner, you never stop being busy! There is a never-ending stream of work to do, and when you’re growing a business one of the first things to slip is keeping track of the bookkeeping.

And when you’re not keeping track of the bookkeeping (whether you’re doing it yourself or giving it to a professional), that $30,000 threshold can fly by faster than you can blink. So if business has been going really well for you lately, and you’re not registered yet, it might be a good time to do it — or at least time to take a closer look at the pros and cons. 

Reason #2: You Only Remit the Difference (and Sometimes That Means CRA Pays You)

Before I explain further, I want to talk a little bit about the difference between tax and GST/HST.

Tax in the context of this article is income tax. Income tax is a mandatory levy imposed on the profits of businesses and incomes of individuals.

GST/HST is a kind of excise tax. Excise taxes are levied on most goods and services sold for domestic consumption. It’s only charged to your clients and customers in Canada, and it’s charged at a rate based on where they are when they receive the goods or services — not where you are when you give, ship, or deliver them.

Income tax is collected directly by CRA. GST/HST is collected by you, on behalf of the CRA as their registered agent. You then submit the GST/HST you’ve collected to the CRA on a regular basis (for most businesses, either annually or quarterly depending on how much you collect).

At this point, you might be thinking WOW, that is a LOT of GST/HST going to the government, Katy! And while a lot of federal revenue comes from the GST ($16.4 billion in 2023) there’s a system of credits that gets passed around through all GST/HST registrants to prevent a cascading or compounding effect of anywhere from 5% to 15% getting added to every sale.

These credits are called Input Tax Credits or ITCs, and you collect them by purchasing goods and services in the course of your own business.

So let’s say you collected $1,000 in GST from your customers, but you paid out $600 in GST on goods and services. The $600 are ITCs that get deducted from the $1,000… meaning you only actually give CRA $400.

On the other hand, let’s say you collected $600 in GST from your customers, but you paid out $1,000 in ITCs. In this scenario, the CRA will give you the $400 because you paid out more than you collected.

This second scenario is relatively common when you have a lot of sales to customers outside of Canada.

Reason #3: You’ll Establish Credibility

Like I mentioned earlier, one of the things I came up against were potential clients who wondered about my credibility because if my sales were that low, was I any good at what I do? or was I serious enough about my business? would I pack up shop, leave them in the lurch, because I wasn’t able to generate enough business to sustain myself?

Collecting GST/HST is another tick in the box that you’re actually a “legit” business and not a hobbyist.

(Sidebar — in my opinion, all businesses are “legit” businesses, whether it’s your side hustle or your full time gig. But I’ve been told I’m an outlier that way.)

Reason #4: Business Numbers Can Give You More and Easier Access to Business & Financial Supports

This is actually really overlooked, which is a shame because it can be such a powerful tool in your business.

For example, some wholesalers require you to provide your GST/HST number (or Business Number) before they’ll start supplying to you. 

Other programs like small business grants and funding all require you to have Business Number in place, as do banks if you’re looking for a business credit card or loan. 

Learn More About Books Club 

There you have it, 4 reasons you (probably) should register for GST/HST “early.”

Of course, once you register it does become one more thing to keep track of. And if you’re not ready (or willing — totally valid!) to outsource your bookkeeping yet, that responsibility falls on you. I totally understand that bookkeeping can be tedious work and it can be hard to make the time for it when you have so many other things begging for your attention! 

But that’s why I created Books Club. It’s a virtual co-working group where we get together for a couple of hours and get our bookkeeping done. We also have a member’s area with resources and a forum where you can ask me anything. Books Club is PWYW, which means it’s free if you want it to be. Click below to learn more. I hope to see you there!

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