GST and QST registration becomes mandatory as soon as your taxable sales exceed $30,000 over four quarters. Voluntary registration lets you recover the tax paid on your expenses. Complete service at $171.34 at Labo Legal.
GST and QST are among those subjects entrepreneurs put off until the day a client asks for a tax number, or worse, until Revenu Québec gets involved. Here are the essentials, without jargon, so you know when to register, how, and what comes next.
The famous $30,000 threshold
The basic rule fits in one sentence: as soon as your taxable supplies exceed $30,000 over four consecutive calendar quarters, you stop being a “small supplier” and registration for the GST and QST files becomes mandatory. The calculation runs continuously, over four rolling quarters, not by calendar year: you can therefore cross the threshold in the middle of March and have to register without waiting.
Watch for the exceptions. Some sectors, such as the paid transportation of passengers, must register from the first dollar. Conversely, certain supplies are exempt and do not enter into the calculation. Where there is doubt about the nature of your revenue, better to check than to assume.
Registering before the threshold: often worth it
Voluntary registration is permitted before reaching $30,000, and it is often to your advantage. Once registered, you recover the GST and QST paid on your business expenses through input tax credits and input tax refunds. For a start-up investing in equipment, software or professional fees, those refunds are a cash-flow boost not to be dismissed.
Voluntary registration also sends a signal of seriousness: billing without tax amounts to announcing to your business clients that your revenue is modest. Many entrepreneurs prefer to avoid that involuntary transparency.
What changes once you are registered
Registration creates three obligations. Collect: your invoices must show your GST and QST numbers and add 5% and 9.975% on taxable supplies. Report: depending on your volume, Revenu Québec assigns you a monthly, quarterly or annual filing frequency. Remit: the tax you collect is not yours; it passes through you to the State, and holding on to it to finance your operations is one of the most dangerous shortcuts there is, because directors can be held personally liable for it.
Starting right the first time
In practice, registration goes through Revenu Québec, which administers both taxes in Québec, and comes with, where needed, the opening of your business account with the Canada Revenue Agency and your source-deduction accounts if you hire. The forms do not forgive improvisation: a badly chosen effective date or an unsuitable filing frequency is paid for in hours of correction. That is precisely what our registration service settles in a single order, with the right settings from the start.
The money you collect is not yours
The phrase sounds severe; it is nonetheless the exact description of the mechanism. The tax you bill is collected on behalf of the tax administrations, and the law treats it as sums held for their benefit, separate from your own patrimony. That is what explains the severity of the consequences where remittance fails.
Two of them are worth knowing before the problem arises. First, the authorities have particularly effective means of recovery over those sums, faster than for an ordinary debt. Second, and above all, the directors of a corporation can be held personally liable for tax collected and not remitted. The screen of the legal person, which protects against most commercial debts, does not operate here.
Hence the habit we recommend to all our clients, and which costs nothing: a second bank account, into which the tax collected is transferred as the money comes in. That simple reflex removes the temptation to use the money to fill a dip, and it makes the moment of remittance painless. The businesses that end up in difficulty on this point almost all started with a temporary shortfall they thought they would make up.
Invoicing properly, in your client’s interest
An invoice that shows the tax is not enough: the content of the invoice is prescribed, because it is on that basis that your business client will claim their own credits and refunds.
It must show, among other things, your identification and your GST and QST registration numbers, the date, a sufficient description of what is supplied, the amount before tax and the tax shown separately or in one of the permitted forms. The requirements tighten as the amount rises, and for larger invoices the client’s identification is required as well.
What is at stake is commercial as much as fiscal. A client whose claim is refused because your invoice was incomplete will come back to you, and they will be right. If you operate under a trade name, make sure the identification includes the legal person and not only the banner: our article on the business name sets out that requirement.
When your clients are elsewhere
The rate to bill does not depend on where you are established, but on rules that determine the place of supply. Selling to a client in another province may require you to bill the tax applicable in that province rather than the QST, and sales abroad obey other rules again, several exports being zero-rated.
These rules vary according to whether goods, services or digital products are involved, and according to the client’s status. It is an area where intuition regularly misleads, and where a systematic error repeated across hundreds of invoices becomes expensive to correct. If a significant share of your revenue comes from outside Québec, have your treatment confirmed at the outset rather than discovering it in an audit.
Deregistering at the right moment
Registration does not lapse of itself. A business that stops operating must file its last returns and close its accounts, failing which the reporting obligations keep running on an activity that no longer exists, with the corresponding penalties.
A point not to be neglected: closing can trigger particular treatment of the tax claimed on property you keep, notably the equipment or the vehicle that pass to personal use. That question is settled with the accountant when the cessation date is chosen, not afterward. Our articles on striking a business off the register and on dissolving a corporation put that step back in the context of the whole closing process.
Frequently asked questions
When does GST and QST registration become mandatory?
As soon as your taxable supplies exceed $30,000 over four consecutive calendar quarters. The calculation runs continuously over four rolling quarters, not by calendar year, which can have you cross the threshold in the middle of the year.
Is it worth registering before reaching the threshold?
Often yes. Voluntary registration lets you recover the tax paid on your business expenses, which is a real boost for anyone investing in equipment, software or professional fees at the start.
What is the risk of not remitting the tax collected?
The tax you collect is never yours: the law treats it as sums held for the benefit of the State. The means of recovery are faster than for an ordinary debt, and directors can be held personally liable for it.