Do you have to register for HST? The 30,000 dollar small supplier rule for Ontario restaurants

Most Ontario food businesses end up registered for HST within their first year, because a busy dining room passes the threshold quickly. The rule is simple to state and easy to get wrong in practice, mostly because the test looks backwards over four quarters and not at your accounting year. Here is how the Canada Revenue Agency (CRA) counts it.

What is the small supplier rule?

You are a small supplier, and you do not have to register for GST/HST, if your taxable revenue stays at or below 30,000 dollars over four consecutive calendar quarters. A calendar quarter is a three-month block starting on 1 January, 1 April, 1 July or 1 October. In Ontario the combined rate is 13 percent: 5 percent federal and 8 percent provincial, collected as one tax.

What counts towards the 30,000 dollars?

The CRA counts your worldwide taxable supplies before expenses, including zero-rated supplies, and it adds in the supplies of your associates. It leaves out financial services, sales of capital property and goodwill from selling a business. For a restaurant that means your food and drink sales, catering, gift card redemptions as they are spent, and anything else you sell that carries tax. If you own two cafés through related companies, their sales can be added together, so do not test each one alone.

When do you stop being a small supplier?

There are two triggers, and the faster one wins.

• One quarter over 30,000 dollars. You stop being a small supplier on the sale that takes you over the line. From that sale you must charge HST, and your effective date of registration is no later than that day.
• Four quarters over 30,000 dollars, but no single quarter over. You stop being a small supplier at the end of the month after the quarter in which the total passed 30,000 dollars. Your effective date is no later than your first sale after that point.

A new food truck that sells 12,000 dollars in a summer quarter and 22,000 dollars in the next has passed the four-quarter total, even though neither quarter alone is over 30,000 dollars.

How long do you have to register?

The CRA's examples give you 29 days from your effective date of registration. The tax you should have charged from the effective date is still owed if you register late, and it comes out of your pocket if you did not add it to the customer's bill. That is the main cost of watching the threshold too loosely.

Why would you register before you have to?

A small supplier can register voluntarily if it makes taxable supplies in Canada. The effective date is usually the day you ask for the account, or up to 30 days before. Registered businesses file returns and claim input tax credits on the HST they pay on equipment, rent, supplies and services. A new restaurant that is spending heavily on a fit-out before it opens often pays far more HST than it collects in its first months, and registering early is how you recover it. The reverse is also true: once registered, you charge HST on every taxable sale, which your customers see as a 13 percent increase on a small coffee order.

How do you track the threshold?

1. Run a sales report by calendar quarter from your till, with taxable and zero-rated sales shown separately.
2. Add the last four quarters each month and note the total in your books.
3. Put a reminder at 80 percent of the limit, which is 24,000 dollars.
4. Include sales from any related business.
5. Write down the date you pass the limit, and the date you register.

What changes once you are registered?

You show your registration number on invoices, charge HST on meals and drinks, file returns on the schedule the CRA assigns you and keep your records. The next guides cover how often you file and what you can claim back and the point-of-sale rebate on small food orders. For the rate on a standard meal, see HST on restaurant meals in Ontario.

More in the Canadian guides for food businesses.