05/27/2021
Business Insight # 5 — Do you need to register for GST/PST for your business?
As if starting a business isn’t hard enough, organizing your bookkeeping, paperwork, amongst other requirements is a laundry list all to itself. One question that often comes up from self-employed individuals is that do I need to register for a GST and PST account? I’m going to isolate this question to the province of Manitoba, even though the requirements may be similar across Canada. Let’s begin first by looking at GST.
GST – Goods and Service Tax for items sold in Canada charged at 5% of the Sub-total you invoice out. When you invoice your customers for goods and/or services, this may be subject to charging GST, but of course, there are various business nuances that could make what you sell GST exempt, so you would be best to do your due diligence and see what your GST requirements are. Now, the rub is this: Unless your business earns MORE than $30,000 combined in FOUR consecutive calendar quarters, then you actually DON’T have to register for a GST account. Now why would you register for GST if it’s not necessary? Well, there are two components to GST as it pertains to bookkeeping. ONE, the GST you would charge to customers on their invoices, and TWO, the GST you incur by paying your bills, or vendor invoices. The GST you pay on expenses incurred in the process of conducting business you actually get to claim and offset against the GST charged on your customer invoices. For example, say you billed a customer (in a month) for $5,000 (before applicable taxes) for services rendered. In this case your total invoice would look like this: Sub-total = $5,000, GST charged = $250, PST charged = $350 (more on this in a bit), total invoice = $5,600. So now, the $250 you charged and collected in GST must be remitted BACK to the government (Receiver General) based on your remittance cycle which can be either MONTHLY, QUARTERLY, or YEARLY. If your remittance cycle is monthly, for example, and you also paid $100 in GST for expenses you incurred in that month, then you would remit the difference (assuming you’re registered), or $250 - $100 = $150. Your bookkeeper would track both the GST charged and paid in a particular month (assuming that’s your cycle) and notify you of how much you are to remit at the deadline — which is on the last day (typically) of the following month.
PST — Provincial Sales Tax, or also called RST, Retail Sales Tax. In Manitoba, the RST rate charged on (applicable) billable goods and services is 7% of the Sub-total you invoice out. What differs in terms of if you must register for an RST account is that if you have MORE than $10,000 in sales for a Calendar/Fiscal year, then you MUST register for an RST account—or, if you don’t register right away, you must register in the month you anticipate passing the $10,000 threshold. Similar to GST, the remittance cycles for RST are either MONTHLY, QUARTERLY, or YEARLY (depending on how much your sales are). In the above example, the $350 charged on the $5,000 sales is 7% of that total—if you haven’t done the math already. There are no off-setting credits like for GST, but the government may give you a commission when you file which is a slight discount to what you owe; a little thanks for collecting on their behalf, how nice. RST is due on the 20th of the following month from when your remittance cycle ends. Your bookkeeper again would track the RST you collect on invoices billed out to customers and adjust this account when a remittance is made.
As it pertains to your bookkeeping, your GST and RST accounts serve as holding and clearing accounts as you collect tax (holding) followed by when you remit tax (clearing). This should give you a general idea on the requirements of these taxes. Now, what the government DOES with this money is a whole-other conversation, and one you probably don’t want to hear about from me—unless you’re really bored.
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Have a small business in Winnipeg and need help with your bookkeeping? Give me a call and maybe I can help you out!
Clean-up/Catch-up/Monthly maintenance, we do it all for only $25 per hour (total monthly cost in most cases = $75 - $100 per month).
GEOFF NAULT BOOKKEEPING
PHONE) 204-791-9605
EMAIL) [email protected]
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