Know Which Taxes You Need to Collect

Even the newest, smallest, and home-based businesses have tax obligations. Here you’ll find the basic guidelines to ensure you collect and remit the required taxes for your business in British Columbia.

Provincial Sales Tax (PST)

Provincial sales tax (PST) is a retail sales tax that is payable when a taxable good or service is acquired for personal use or business use, unless a specific exemption applies. The PST is applied at a rate of 7% in British Columbia.

All businesses are required to collect PST unless they are supplying: food for human consumption, books, newspapers and magazines, children’s clothing, bicycles, prescription medications and over the counter medicines such as cough syrup.

The frequency in which you file a return and pay tax will be determined by what kind of business you operate and how much tax you collect each year. Most businesses file and pay monthly, but you can also file and pay quarterly, annually and semi-annually depending on how much tax you collect.

For more information, read these frequently asked questions and visit the Canada Revenue Agency (CRA) website.

You can also refer to the Certified General Accountants Association of British Columbia (CGA-BC) website.

You can find a list of what products and services are applicable to PST on the provincial government website.

Federal Tax Requirements

If you’ll be charging the harmonized sales tax (HST), hiring employees, incorporating, or importing or exporting, you’ll need to register for a business number with Canada Revenue Agency (CRA). For more information regarding the different accounts and how to register, please refer to the CRA website.

The Benefits of HST Registration

Registering for an HST account is optional if your gross annual business revenue is not expected to exceed $30,000. However, registering can provide benefits, including:

• Tax reduction. If you buy goods and service for your business and you have an HST account, you can apply the HST you paid against the HST you collected, effectively generating a refund.

Know What Business Expenses You Can Claim

Don’t pay more tax than you need to. Check CRA’s business expenses page for a list of acceptable business expenses that can be claimed when filing your taxes.

Keep Accurate Business Records

Keep detailed, accurate business records to:

Accountants and Bookkeepers: Your Partners in Business

An accountant or bookkeeper is a valuable resource to help you with tax and bookkeeping questions, and to provide peace of mind that your business is complying with all recordkeeping and taxation requirements.

A professional bookkeeper and/or accountant can do your recordkeeping, file your taxes, and ensure you’re using all tax deductions and credits available to you.

To find an accountant, you can refer to the Certified General Accountants Association of BC website.

• Peace of mind. It’s easy to get caught up in busy day-to-day operations and forget to register for an HST number. If you think you might be close to the mandatory threshold, consider registering right away. Otherwise, when you reach the mandatory limit, your business will be required to pay the HST out of pocket because you cannot charge your clients retroactively.
• Pricing strategy. If you have regular, repeat clients and you think your business revenue will reach the mandatory threshold, consider collecting HST from the outset. Otherwise, your clients might protest when their prices go up by the amount of the HST, and ask that you lower your prices to absorb the cost.
  • Track expenses to spot opportunities for cost savings and identify deductions.
  • Obtain financing from lending institutions or investors with accurate and up-to-date financials.
  • Comply with tax requirements and be audit-ready