HST for contractors in Canada: a simple guide

What HST is

GST/HST is a sales tax on most goods and services in Canada. In provinces that use the Harmonized Sales Tax (HST), the federal GST and the provincial tax are combined into one rate. In Ontario it is 13%. Other provinces and territories use different combinations of GST, HST and provincial taxes, so check the CRA's rate table for where you work.

Do you have to register?

You are a "small supplier" if your worldwide taxable sales were $30,000 or less in a single calendar quarter and over the last four consecutive calendar quarters. Once you go over that, you must register for a GST/HST number and start charging the tax. You can also register earlier by choice, which many contractors do because they pay a lot of tax on materials and want to claim it back.

What you charge and what you claim

• You charge HST on your taxable work, and show it on your quotes and invoices along with your GST/HST number.
• You claim input tax credits (ITCs) for the HST you paid on business purchases such as materials, tools and fuel. You need proper receipts for this.
• You send the difference to the CRA. HST you collected minus the ITCs you claim is what you owe (or get back) on your return.

A simple example (Ontario, 13%)

You quote a job at $10,000 before tax. HST is $1,300, so the customer pays $11,300. You spent $4,000 on materials and paid $520 of HST on them. Your HST owing for this job is $1,300 collected minus $520 of input tax credits, which is $780.

Quotes with and without HST

Customers often compare prices, so it helps to show the total both ways. Some items on a job may be taxed differently, such as a part of the work that is zero-rated or exempt. If you are not sure how an item is treated, ask your accountant before you send the quote.

Keep your records for six years

The CRA expects you to keep sales and purchase invoices and other records related to your GST/HST for six years from the end of the year they relate to. Keeping them organized job by job makes this far easier.

How BrightenBooks helps

BrightenBooks adds HST to quotes automatically (and lets you leave it off individual items), shows every job's totals with and without HST, reads the HST off your receipts, and has an HST return helper and an accountant export, so tax time is a few taps instead of a weekend.

CRA: GST/HST for businesses

This guide is general information for small businesses in Canada, not tax or legal advice. Rules and rates change and depend on your situation, so check with the Canada Revenue Agency (CRA) or your accountant.