Tax Time Trap: How GST/HST Can Quietly Destroy a Small Business

Understanding GST and HST can be the difference between a profitable Canadian business and one that is constantly scrambling to pay government penalties. This post breaks down the key ideas from the video and puts them into a simple reference you can come back to whenever you need it.​

What GST/HST Actually Are

• Goods and Services Tax (GST) is a federal tax applied to most goods and services sold in Canada.​

• Harmonized Sales Tax (HST) is a combination of federal GST and provincial sales tax in certain provinces like Ontario, Nova Scotia, New Brunswick, PEI, and Newfoundland and Labrador.​

• In HST provinces, you charge a single rate instead of separate GST and provincial tax lines on your invoices.​

  
  

When Your Business Must Register

• Most small businesses must register for GST/HST when their worldwide taxable revenues exceed 30,000 CAD in a single calendar quarter or over four consecutive quarters.​

• “Taxable revenues” generally include sales of most products and services, even if you are not yet registered; once you cross the threshold, registration stops being optional.​

• Some professionals and online businesses hit this threshold faster than expected, especially when payments are processed through platforms that do not automatically handle GST/HST for you.​

  
  

Charging and Collecting Correctly

• Once registered, you must charge GST or HST on taxable supplies from the effective date of registration, not from whenever you “get around to it.”​

• Your invoices should clearly show your business name, GST/HST number, the tax rate applied, and the total tax charged so that clients can claim input tax credits where eligible.​

• Failing to charge tax properly does not make the tax disappear; the Canada Revenue Agency (CRA) can still assess you for the amount you should have collected, plus interest and penalties.​

  
  

Filing, Deadlines, and CRA Trouble

• Registered businesses must file regular GST/HST returns (monthly, quarterly, or annually) by their assigned due dates, even if no tax is owing or no sales were made in that period.​

• Late filing can trigger automatic penalties and interest, and repeated non‑compliance increases the chance of a full audit, wage garnishment, or frozen bank accounts.​

• CRA expects you to separate the tax you collect from your operating cash; treating GST/HST as “extra income” is one of the fastest ways to get into serious arrears.​

  
  

How To Protect Your Business

• Set up a dedicated savings or tax account and move the GST/HST portion of every sale into it weekly so the money is always there when it is time to file.​

• Keep accurate digital records of invoices, receipts, and bank statements so you can respond quickly and confidently if the CRA asks questions.​

• If you are already behind, ignoring CRA letters is the worst option; getting expert help early can reduce penalties, structure a payment plan, and prevent aggressive collection actions.