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No matter where you run a business in Canada, if you sell a product you have the obligation to collect sales tax. Ignoring that crucial step in doing business can lead to serious legal complications with your sales tax returns filing. This could potentially cost you heavily or even sink your business. Whether you’re operating in the bustling business hubs of Toronto or elsewhere in Ontario, understanding local sales tax obligations is critical.
Take a look at these 4 tips I have put together to better understand your obligations — and ensure you’re following them.
The federal government and most Canadian provinces collect a sales tax to provide important sources of revenue. Sales taxes require the business to affix a certain percentage of the total sale as tax, collect it, then turn it over to the government’s tax department.
The obligation lies on the business to understand what you need to do when conducting business in other provinces or territories.
Although the GST remains uniform throughout the country, sales tax collection can differ from province to province. Some taxes charge different percentages.
Some commodities qualify for different rates from one province to the next. In some cases, restaurants may be exempt from charging sales tax. In other areas, grocery stores may have to charge a higher sales tax on single serving premade food than traditional items.
With every legislative session the possibility exists that sales tax collection laws and regulations could change. Some could eye higher taxes, especially for high-end purchases. Others may change their collection procedures or expand the scope of which businesses need to pay. As a Toronto business owner, staying updated with changes in the HST rate or regulations through local news sources or direct updates from the Canada Revenue Agency (CRA) website is crucial.
The matter grows more complicated when legislatures pass measures that require clarification by the court system. In many cases, legal conflicts or poor bill writing make it difficult for you to understand your business’s obligation.
The lesson I’ve gathered from this? Every province’s sales tax laws and regulations could change at any time and for any reason. Again, the responsibility falls on the business to stay aware of its obligations even if the laws change.
