One of the considerations many new and growing businesses face is whether to register for HST or not. Registering for HST (GST depending on your province) is optional for businesses until they have more than $30,000 in annual worldwide revenue.
Many people assume that since you are not required to register for HST until you reach that size, they shouldn’t. A couple reasons exist to consider registering before you’re required.
Perceived Legitimacy
If your customers are looking at a few different possible vendors, and you’re the only one that won’t charge them HST, they may wonder if you’re operating legitimately. If they’re worried about your credibility, that could reflect badly on their perception of your business.
Perceived Size
Businesses that don’t have to register for HST could have nothing to do with legitimacy, and could just be very small businesses.
In this case, let’s say you are proposing to bill your client $2,000 for your services, and you aren’t charging HST. Your potential client now knows they are apparently one of less than 15 clients you have a year.
That may not be a good message to send to your customers if you’re trying to appear larger.
Input Tax Credits
As a small business, you want to save money wherever you can. If you’re registered for HST, you can claim back the HST that you pay on all your expenses. This can be big money back for you if you’ve got a lot of start-up costs.
Concluding Thoughts
Keep in mind that registering for HST doesn’t require you to incorporate, and doesn’t cost anything. If you are planning to register for HST, make sure you speak to your accountant to ensure it is set up properly and you’re keeping the appropriate records. Also note that some businesses are not allowed to register for HST because of the industry they’re in.
Ian Edmonds is a CPA, CA working in Toronto with small and medium sized businesses in Canada to provide personalized, approachable tax and accounting advice and services.