3 Reasons Why You May Want to *Voluntarily* Register for GST/HST
/What is GST/HST registration? By registering, you’re sending the message to the government that you sell some amount of taxable goods or service, and you will now be charging GST/HST on these products you sell to your patients. There are two sides to the taxable coin, pun intended ;)
You’re a vessel through which tax flows. You’ll now collect GST/HST from your patients, which you’ll hold on to and then remit (give back) to the government.
You’ll benefit from a net positive effect. Since you’re registered, you’ll be able to get a refund of some of the GST/HST you pay on your expenses. More on this below.
When is it mandatory? You’ll generally have to register for GST/HST when your taxable sales are above $30,000 in a 12-month period. For holistic practitioners whose primary services are GST/HST exempt, things like supplements, cosmetic services and group programs would all be considered taxable sales. If you want to know which of your services are taxable, click here.
Now you understand the basics, so let’s get into WHY you may want to register before hitting that $30,000 threshold.
1. You’ll get back the GST/HST you pay on purchases used directly in taxable sales.
You can claim a full refund for the GST/HST you pay on things like supplements and needles purchased exclusively for cosmetic acupuncture.
Let’s say you purchase $100 worth of supplements from Supplements Are Best (we’ll stick to a hypothetical company – no favouritism here!). On that purchase you pay an additional $13 in HST. If you were registered for HST, you’d be able to get a refund of that $13 back in your pocket. As you start buying more supplements, this potential refund grows.
2. You’ll get back some of the GST/HST you pay on other purchases NOT used directly in taxable sales.
Other things you purchase, which are business expenses but aren’t sold directly as taxable sales, we call multiple-use purchases. This category includes just about everything you use in your business, from marketing materials to car expenses. For expenses in this category, you can get a partial refund of the amount of GST/HST you pay depending on what proportion of your revenue comes from taxable sales.
Let’s use an example. Of your total revenue (all the money coming in), 20% of it comes from supplement sales, and the remaining 80% comes from patient visits. That 20% is important! This means you’ll be able to get a refund of 20% of the GST/HST you pay on these other expenses.
Now this wouldn’t be a tax discussion without a list of exceptions to the rule. We’ll let you check out these exceptions in more detail here.
3. As an associate who pays GST/HST on their split, you’ll increase your portion of the split.
You might be giving away more of your split than you realize. Lucky for you there’s a way to get a bit of it back! Some clinics will charge GST/HST on the portion of the split they retain. As an FYI – there are many determining factors to consider when charging GST/HST on a split, and they can be found in detail here.
Why does it matter if the clinic you’re at charges GST/HST on your split? Let’s pretend you’re on a 60% split at Best Clinic Around (again no favouritism here!). But the clinic also charges you 13% HST on the split. This means the clinic takes 40% plus HST. We’ll do the math for you….
100% of your revenue – [40% + 13% HST] = 55% in your pocket
If you’re not registered for GST/HST, you’re only getting a 55% split. That extra 5% lost adds up big time over the course of your year. How can you get this back? Well, it’s the same method as point #2 on our list. If you register for GST/HST, you’ll be able to get a portion of this lost money back, depending on what percentage of your revenue comes from taxable sales. If you’re still looking for more info, we go into detail on a similar example here.