“Do I need to charge HST?”
CISED thanks Rob Leavoy, Senior Manager, Indirect Tax Services at KPMG in Ottawa for his informative presentation on the rules and processes for non profit organizations regarding indirect taxes (GST, HST).
Indeed, Rob answered this question.
1. The rules are complicated for non profits and charities, and there are many variations of the rules that will apply. There is no single, definitive answer to this question.
2. The types of goods and services to be sold, the size of the organization, the total value of sales, and the nature of the accounting practices used within the organization are just some of the determining factors.
3. It is voluntary (ie not mandatory) to charge HST if you are a “small vendor.”
4. You are considered a small vendor in the following situations:
a. Private business: If you’re earned revenue is less than $30K
b. Non profit organization: If you had earned revenue less than $50K
c. Charity: If you have total annual income from all sources less than $250K
5. HST applies to most goods and services supplied (ie sold) in Canada
6. If your organization is charging your clients HST, you may also claim “input tax credits” for HST your organization may have paid on inputs to your product or service.
7. If your organization is selling products or services that are exempt from HST, then you may not claim an input tax credit for the inputs for those products/services.
8. Some goods and services are either “Zero Rated” or tax exempt, in which case they are not taxable. Check to see if your social enterprise is producing something that should not have HST applied. Relevant examples include the following:
a. Basic groceries
b. Medical devices
d. Many child care/personal care/health care/educational services.
9. Note that for charities, sales of new goods on a regular basis are taxable. (unless a specific exemption applies)
10. There are different ways to account for HST if you are a non profit or charity, as follows:
a. Special Quick Method (for non profit orgs that are at least 40% government funded)
b. Quick Method (for non profits with annual revenues under $200K, which may change to $400 with proposed changes in Bill C-38)
c. Special Charity Method (for charities only)
For more information on GST/HST information relevant to non profits, Review CRA Bulletin RC4081.
*Note that there are many exceptions and exclusions and relevant details not noted here. This overview is designed simply to highlight some of the issues of indirect taxation that might be faced by social enterprises operated by non-profit organizations and charities. If you have specific questions, consult CRA and/or a tax professional.
Photo Credit: CP/Bayne Stanley