Canada Revenue Agency (CRA) Small Supplier Definition

Does Your Business Need to Collect GST/HST or Not?

Fruit and Vegetable Sales
Image (c) Dave Mcleod

Importance

The small supplier definition is important to Canadian small businesses because whether or not your business qualifies as a small supplier determines whether or not you have to register for, collect and remit the Goods and Services Tax (GST)/Harmonized Sales Tax (HST).

Canada Revenue Agency (CRA) Definition for Businesses

For businesses, the Canada Revenue Agency's small supplier definition states that to qualify as a small supplier, your total taxable revenues (before expenses) from all your businesses are $30,000 or less in the last four consecutive calendar quarters and in any single calendar quarter.

Now it's not quite as simple as it sounds. To determine if you fit the small supplier definition, making $30,000 or less annually, you have to include your worldwide revenues from your sales of goods and services that are subject to GST/HST, which includes zero-rated sales and supplies (zero-rated items have a tax rate of zero, and include items such as prescription drugs, grocery staple items, and medical devices such as wheelchairs, hearing aids, and prescription eyeglasses - for more information on zero-rated items see What kinds of goods and services are GST exempt or zero-rated?)

You also have to include revenues of any of your associates. You have to exclude financial services, goodwill, and sales of capital property.

Examples of Small Supplier Definition Calculations

In the following example total revenue for the preceding four quarters does not exceed $30,000 despite the increase in revenue for the quarter ending March 31, 2016 so the small supplier definition applies (for at least the following quarter, plus one month):

Quarter ending June. 30, 2015$8,000
Quarter ending Sept. 30, 2015$5,000
Quarter ending Dec. 31, 2015$6,000
Quarter ending March 31, 2016$10,000
Total for last for consecutive calendar quarters$29,000

 

However in the following example revenue for the following quarter ending June 30, 2016 was also strong, pushing revenue for the preceding four quarters over the $30,000 limit - so the small supplier definition ended as of June 30, 2016 plus one month.

The business must apply to register for the GST/HST within 30 days of the first taxable sale. In this case small supplier status ended on July 31, 2016 so if the next sale occurred on August 1, 2016 the business must apply to register for the GST/HST by the end of August 2016 :

Quarter ending Sept. 30, 2015$5,000
Quarter ending Dec. 31, 2015$6,000
Quarter ending Mar. 31, 2016$10,000
Quarter ending June. 30, 2016$10,000
Total for last for consecutive calendar quarters$31,000

 

The calculation for determining small supplier status should be made at the end of every quarter.

Note that if on any day the business makes a sale that exceeds the $30,000 limit the small supplier exemption immediately ceases and:

  • GST/HST must be collected on the sale
  • GST/HST must be collected on subsequent sales
  • The business must register for the GST/HST within 30 days

Small Supplier Definition for Charities and Public Institutions

The small supplier threshold for charities and other public service bodies is different; to qualify as a small supplier there are two tests, one of which must be met to qualify for small supplier status:

1)  The Annual Taxable Supplies Test

The charity or other public service body's revenues from worldwide taxable supplies (not including sales of capital property and financial services) must be equal to or less than $50,000 in the current calendar quarter and over the preceding four consecutive calendar quarters, or:

2) Gross revenue Test

First fiscal year - registration for GST/HST is not required

Second fiscal year - if the gross revenue from the first fiscal year is $250,000 or less registration for GST/HST is not required.

Subsequent fiscal years - if gross revenue from either of the previous two fiscal years is less than $250,000, registration for GST/HST is not required.

GST/HST Registration Information

Note that even if you are a small supplier, you may still want to register for the GST voluntarily. Registration will allow you to claim Input Tax Credits (ITCs) for the GST/HST you paid on items and services purchased for your business, as well as, for example, GST/HST on hotels, meals and other  expenses incurred when traveling for business purposes.

Some Canadian provinces have harmonized their Provincial Sales Taxes (PST) with the GST to form the combined HST.

  Others (such as British Columbia) have not and still charge GST and PST separately. See Tax Rates for a list of current rates for each province and territory.

For a primer on GST/HST registration see: Starting a Business: Register for the GST/HST.

Examples: Even though Jean qualified as a small supplier, he decided to register for the GST/HST.