Launching a small business can feel like swinging blindly at a big, colourful, juicy piñata: a hit or a miss, but if it’s a strike, you get all the yummies and toys inside, along with some lame confetti and papier-mâché filler.
The lackluster, more boring, of the bunch become the key steps and financial decisions to starting a new business. But, without careful planning, you might as well be that person with their eyes shut, hopelessly flailing their stick into open air.
One of the things you need to consider is whether or not you need to charge Goods & Services Tax (GST).
We hope our handy tips and our clarification of some common myths helps you move forward in your small business planning.
What is GST?
GST is an input tax: Meaning that the amount that you PAY to others reduces the amount that you OWE.
Why would you register for GST before making sales of $30,000?
If you are starting your small business and incurring high start-up expenses. You can get a refund on the GST that you pay on those expenses.
Some potential clients might not want to do business with you if you don’t have a GST number.
Why would you hold off from registering?
Keep your paperwork simple for as long as possible. If you register you will need to hire a bookkeeper to make sure your returns are correct, filed properly and on time.
When you bill your clients your total will appear cheaper than a competitor who charges GST.
It’s July and I’ve just made sales of $30,000. What do I do now?
By law you have 3 months AFTER you have made sales of $30,000 to register and start charging GST.
You must include your GST number on all your invoices.
You must keep all records of GST charged and paid for 7 years
Here are four common myths about Goods and Services Tax:
Myth: Every small business must register for GST.
Fact: Every small business that has made GROSS SALES of $30,000 in a calendar year must register.
Myth: I am registered for GST but my sales are less than $30,000 so I do not need to charge my customers the tax.
Fact: If you are registered, then you are obligated by law to charge all of your customers GST.
Myth: GST and HST are two different taxes.
Fact: In fact they are the same tax being paid to the same agency (Canada Revenue Agency). The only difference is that in BC we now charge GST of 5%; before we charged HST of 12%.
Myth: My Business number is different from my GST number.
Fact: Your GST number is your Business number (9 digits) with the ending RT0001.