GST and PST: How to Register Your Small Business
Starting a small business in British Columbia means navigating several important responsibilities, including registering for GST (Goods and Services Tax) and PST (Provincial Sales Tax). These taxes are essential to running a legally compliant business and understanding them early can save you unnecessary complications later.
This guide covers what you need to know about GST and PST, from understanding their application to the steps for registration.
What is GST?
GST is a 5 percent federal sales tax applied to most goods and services in Canada. Businesses earning over $30,000 annually in gross revenue must register for GST unless they provide exempt products or services. Voluntary registration is also possible, allowing you to recover GST paid on business expenses through input tax credits.
Registered businesses are responsible for collecting GST on taxable sales, submitting collected taxes, and filing returns as required.
What is PST?
PST is a 7 percent retail sales tax applied to taxable goods, services, and products in BC. Businesses with gross sales of $10,000 or more must register to collect PST unless specific exemptions apply.
Once registered, businesses are required to collect PST on applicable sales, report the amounts collected, and pay any additional PST owed on items used within the business.
How to Register for GST
To register for GST, start by obtaining a Business Number (BN) through the Business Registration Online service. Once you have a BN, you can add a GST account to it. Registration is straightforward and ensures your business is set up for tax compliance.
How to Register for PST
You can register for PST online through eTaxBC. The process typically takes 15–25 minutes and may require identification or supporting documents. Ensure you have all necessary information prepared before starting.
Who Pays GST and PST?
GST applies to most goods and services purchased in Canada, while PST applies to taxable goods and services in BC. Certain exemptions may apply to both, depending on the nature of the goods or services.
Who Charges GST and PST?
Businesses registered for GST must charge this tax on taxable goods and services sold within Canada. Similarly, businesses registered for PST must charge and remit PST on applicable sales.
Are There Goods and Services Exempt from GST and PST?
Some goods and services are zero-rated, meaning they are taxable at a rate of 0 percent. These include basic groceries, prescription medications, and exports. Businesses providing zero-rated supplies can still register for GST and claim input tax credits for GST paid on expenses.
Other goods and services may be entirely exempt from GST or PST. For example, used residential housing, many educational services, and some health services fall into this category. Businesses providing only exempt supplies cannot register for GST or claim input tax credits.
What Are Input Tax Credits?
Input tax credits allow registered businesses to recover the GST paid on eligible business expenses. These credits are offset against the GST collected from customers. If the credits exceed the amount owed, the business may receive a refund. Input tax credits can only be claimed for purchases directly related to your business operations.
You Need To Understand GST and PST
Understanding and registering for GST and PST are important steps for business owners in BC.
These taxes ensure compliance and play a role in managing your business finances effectively. By following the steps outlined here, you’ll be equipped to confidently handle your tax responsibilities, leaving you free to focus on growing your business.