Taxes: Knowing What's Required for Your Start-Up

Know Which Taxes You Need to Collect

Even the newest, smallest, and home-based businesses have tax obligations. Here you'll find the basic guidelines to ensure you collect and remit the required taxes for your business in British Columbia.

Transitioning to HST

Legislation to enact the harmonized sales tax (HST) has been passed by the Governments of Canada and British Columbia. The HST is applied on most supplies of goods and services made in British Columbia at a rate of 12%, consisting of the 5% federal portion and a 7% provincial portion.

If your business is already registered for the goods and services tax (GST), you will be required to collect the HST and to report your HST according to your current GST filing frequency. HST remittance can be filed monthly, quarterly or yearly. You can investigate the advantages and disadvantages of the filing schedule for your business with your accountant.

Some key points to note as you transition to HST:

• The new tax was effective July 1, 2010.
• The rate is 12%.
• If your business is already registered for GST, you will automatically be registered for the new HST.
• For new HST registration, the mandatory registration threshold is $30,000 in gross revenue.
• Generally speaking, GST exempt sales will also be HST exempt.
• HST returns will now be required to be filed electronically.
• Final filing date for PST was July 23, 2010.
• Businesses can claim HST tax input credits for all their business expenses.

For more information, attend the HST seminars at Small Business BC and visit the Canada Revenue Agency (CRA) website for the latest updates.

You can also refer to the Certified General Accountants Association of British Columbia (CGA-BC) website and HST brochure or to the BC Consumer Taxation Branch website.

You can find a list of what products and services are applicable to HST on the provincial government website.

Federal Tax Requirements

If you’ll be charging the harmonized sales tax (HST), hiring employees, incorporating, or importing or exporting, you’ll need to register for a business number with Canada Revenue Agency (CRA). For more information regarding the different accounts and how to register, please refer to the CRA website.

The Benefits of HST Registration

Registering for an HST account is optional if your gross annual business revenue is not expected to exceed $30,000. However, registering can provide benefits, including:

• Tax reduction. If you buy goods and service for your business and you have an HST account, you can apply the HST you paid against the HST you collected, effectively generating a refund.
• Peace of mind. It’s easy to get caught up in busy day-to-day operations and forget to register for an HST number. If you think you might be close to the mandatory threshold, consider registering right away. Otherwise, when you reach the mandatory limit, your business will be required to pay the HST out of pocket because you cannot charge your clients retroactively.  
• Pricing strategy. If you have regular, repeat clients and you think your business revenue will reach the mandatory threshold, consider collecting HST from the outset. Otherwise, your clients might protest when their prices go up by the amount of the HST, and ask that you lower your prices to absorb the cost.

Know What Business Expenses You Can Claim

Don’t pay more tax than you need to. Check CRA's business expenses page for a list of acceptable business expenses that can be claimed when filing your taxes.

Keep Accurate Business Records

Keep detailed, accurate business records to:

• Track expenses to spot opportunities for cost savings and identify deductions. 
• Obtain financing from lending institutions or investors with accurate and up-to-date financials.
• Comply with tax requirements and be audit-ready.

Accountants and Bookkeepers: Your Partners in Business

An accountant or bookkeeper is a valuable resource to help you with tax and bookkeeping questions, and to provide peace of mind that your business is complying with all recordkeeping and taxation requirements.

A professional bookkeeper and/or accountant can do your recordkeeping, file your taxes, and ensure you’re using all tax deductions and credits available to you.

To find an accountant, you can refer to the Certified General Accountants Association of BC website.