Do I need to charge GST?

When should a small business charge GST?

Do you find that some accountants babble on in “legalese”? Well, here is some information for you on the GST (Goods and Services Tax) written in plain English, as well as a few tips!


What is the difference between GST and HST?

The GST and HST are essentially the same tax in the way that it is collected. A province either has GST + PST (Provincial Sales Tax) or just HST (Harmonized Sales Tax). Unless you live in Alberta, where the government decided that they didn’t need to charge a Provincial Sales Tax! In BC, the GST is charged at 5% of applicable goods and services, whereas, in a province such as Ontario, the HST is 13%. Your job as a business owner is to collect GST on behalf of the government BUT you do have the opportunity to keep some of it when you claim ITCs.

What is an ITC?

ITC stands for Input Tax Credit. We accountants love to abbreviate everything! This is the GST that you pay when you buy supplies for your business and every penny of it will return to your pocket when you file your GST return. The formula is:

GST Collected – GST Paid (ITCs) = GST Owing to CRA

You will get a GST refund if your GST Paid is higher than your GST Collected! This may happen if your business is operating at a loss this year or if you have made a large purchase such as a work truck.

Do I have to register for GST?

You do not have to register for GST if you are a small supplier with sales less than $30,000 annually. You are not allowed to register if your sales are GST exempt. You should register if your sales are zero-rated because you will be able to get a GST refund!

So, if your sales are higher than $30,000 annually you will have to register for GST and you will need to file annual or quarterly GST returns. You are also required to write your GST number (your 9-digit CRA Business Number with RT0001 at the end e.g. 12345 6789 RT0001) on all your invoices to customers.

What are zero-rated supplies?

Attention Hobby Farms – you will want to read this!! Zero-rated supplies are GST taxable at 0%, meaning that if your business falls in this category, you do not charge GST on your goods, but you can claim ITCs on the supplies you purchase and you get a GST Refund!

Some common goods and services taxable at 0% include:

  • basic groceries such as milk, bread, and vegetables
  • agricultural products such as grain and raw wool
  • most farm livestock
  • most fishery products such as fish for human consumption

As mentioned before, you are not required to register for GST, but it will be beneficial to you as you will be able to claim a GST refund! Your accountant would be happy to take care of the application for you.

What are GST exempt supplies?

If you provide only exempt goods and services, you cannot register for GST. This means that you do not charge the GST on your supplies of your goods and services, and you do not claim ITCs.

Some common exempt goods and services include:

  • long-term residential accommodation (e.g. a basement suite in your home)
  • most health, medical, and dental services
  • child care services
  • music lessons
  • most goods and services provided by charities or non-profit organizations

What is the GST Place of Supply Rule?

This rule basically states that the GST/HST rate is determined by the location of the customer. For example, if I provide tax services to someone in Ontario, I will have to charge that person 13% HST, even though I am operating out of BC. If I were to install flooring in someone’s house in Washington, I would not charge that person GST at all.

What is the difference between GST and PST?

The main difference is that GST allows Input Tax Credits (ITCs) while PST does not. However, there are some special rules to note with PST so check out The Basics of PST! We hope you enjoyed this post and found it informative!

About the Author:


Alicia Loewen is a certified Advanced QuickBooks Online ProAdvisor and the owner of Coastal Tax and Accounting Services on Vancouver Island, BC. Coastal Tax is a modern accounting firm and offers all services remotely using online and paperless software to make bookkeeping and tax preparation as painless as possible. Contact Alicia to set up a free consultation.


Please check out the following CRA links for more information:

“Register for a GST/HST account”

“Basic Information on the GST/HST”

“List of GST/HST zero-rated supplies”

“List of GST/HST exempt supplies”



How to Clear Cache in Google Chrome

How to Clear Cache in Google Chrome and save as a Bookmark tab. If you are using QuickBooks Online or other cloud-based apps and you find that your program is running slow or experiencing glitches then clearing the cache every day will help you!

Do You Qualify for the Affordable Child Care Benefit? (BC)


British Columbia has introduced a new program to replace the Child Care Subsidy with DOUBLE the previous income cap! If your family income is under $111,000 and you have children in daycare, you should apply for this.

A parent or guardian must be:

  • A resident of B.C.
  • A Canadian citizen, a permanent resident of Canada, a Convention refugee or a person in need of protection

Most types of child care are eligible. Child care by a family member who lives with you and licensed occasional child care are not eligible for funding.

Parents must provide one of the following reasons for requiring child care:

  • Working or self-employed
  • Attending school
  • Participating in an employment program
  • Looking for work (only one parent or guardian)
  • Living with a medical condition

A reason for care is not required if your child is attending a licensed preschool, or if you have been referred by a Ministry of Children and Family Development or Delegated Aboriginal Agency social worker.

Applications are income tested to determine whether a family qualifies for a funding amount based on their annual income and deductions, or adjustments.

Generally speaking, families that earn up to $111,000 may qualify for funding. Families that earn $111,000+ but have considerable deductions for family size or children who have special needs can also apply.


Find more information and apply here.

New QBO Feature – Progress Invoicing!

I’m excited to announce that QuickBooks Online has added a new feature to QBO Plus for Progress Invoicing! This is something I’ve been waiting on for my contractor clients who use Estimating in QBO and want to bill out a portion of the job, such as a 50% deposit to start work.

The options are quite flexible! You can now choose a percent to bill out, a custom amount for each line, or the remaining total of all lines from an Estimate when you convert it to an invoice.

Check out this 4 minute HOW TO video:

UPDATE: This feature must be TURNED ON in the Advanced Settings of the company and it is currently (09/18/2018) only available on the Web Browser version of QBO and not the Mobile App.

How to Read Your QuickBooks Online Profit & Loss Report

Are you a business owner using QuickBooks Online for your bookkeeping and are unsure how to interpret the Profit & Loss Report beyond the “bottom line”?

Yes, of course, you want to know if your business is making a PROFIT (+ number at the bottom) or LOSS (- number at the bottom), but what else should you be looking for? Even if you are using the services of a professional Bookkeeper or Accountant, it can be difficult to get some meaning from numbers on a page.

I’m going to show you a few tricks from an Accountant’s perspective for how to read your QuickBooks Online Profit & Loss Report!

*Check out the SUMMER PROMO offer at the end of this article*

How To Find the Profit & Loss Report in QBO

First, you must run the report! Sign in to QuickBooks Online (QBO) and navigate to Reports on the left-hand menu. The new reports format should have Profit and Loss as a default in the Favourites section at the top, but if you don’t see it there you can type it in the search bar.

Screenshot 2018-06-12 20.34.00

How to Filter the Profit and Loss Report in QBO

There are MANY ways to filter this report and different filters can be useful to inspect different types of information. First, select the time period that you want to review in the Report Period drop down box. Click Run report.

Screenshot 2018-06-12 20.38.31

One of my favourite filters is This Year-to-Date with a filter to Display columns by Months (drop down menu below the report period menu). Click Run report. We’ll talk about how to analyze this in a second. Let’s continue with other filters for now.

Screenshot 2018-06-12 20.40.49

Another favourite filter of mine is to compare to a previous year or previous period. This is great if you are a few years in to running your business and have all the data in QBO! For this one, leave the Display Columns By filter on Total Only and change the Compare Another Period filter to select either the Previous Period or Previous Year. If I am looking at April 30 – June 30 of 2018 and I select Previous Period, I will be comparing this time period to the previous quarter Jan 1 – Mar 31 of 2018. If I select Previous Year, I will be comparing it to April 30 – June 30 of 2017.

Screenshot 2018-06-12 20.50.56

How to Analyze the Profit and Loss Report Over Time

Now that you have filtered to the period of time you want to analyze, ask yourself the following questions:

  1. Is there a trend of Sales going up or down over time? If there is a point in time where it looks like there was steady movement up or down, what changed at that time?
  2. Is there a certain time of year when Sales were higher? What was happening during that time? Perhaps your business has seasonal trends such as Christmas shopping or a busy summer season. Capitalize on those busy seasons by running a promotion or event during those times.
  3. What are the bestselling items? Hopefully you have set up the Products & Services List to track sales in different Income categories. You can use this information to target advertising for your bestselling items!
  4. What items have consistently low sales? Consider if it is worth scrapping those items or adjusting the pricing.
  5. Are the overall Expenses increasing, decreasing, or stable? If your expenses are increasing faster than your Sales you have a problem with either incorrect pricing on Sales or overspending on Expenses. Many business owners focus their energy on increasing profit by increasing sales, but remember that another way to increase profit is to decrease expenses! Try to set budgets and monitor your spending on non-essentials.

How to Analyze the Profit and Loss by Variable and Fixed Costs

Next up is a bit of Cost Accounting! Don’t worry, I’ll be here to walk you through it.

Variable Costs increase when Sales increase and decrease when Sales decrease. Examples of Variable Costs are Job Materials (also called Purchases), Cost of Goods Sold (Inventory Cost), and Subcontractor or Employee Wages (only to the extent that your business would need to hire more people as Sales increase).

Fixed Costs are relatively the same every month or year and are not affected by Sales trends. Examples of Fixed Costs are Insurance, Accounting & Legal, Rent, and Utilities.

Let’s look at an example. ABC Company has been operating for a couple years and has a decent, but still relatively low, profit. The owner of ABC Company can analyze the Profit and Loss Report by identifying which expenses are Variable or Fixed, and projecting what would happen if the company experienced a 25% growth in Sales. To do this, the owner would multiply Sales and all Variable Expenses by 1.25 and leave the Fixed Expenses alone. This projection shows that a 25% increase in Sales will result in a 109% increase to the Net Profit!

ABC Company is set up for success because the variable costs are representing an appropriate % of Sales. This is calculated as Variable Expenses $2,200 / Total Income $4,700 = 47% of Sales. There are variations in different industries, but ideally your Variable Expenses % of Sales is 50% or lower. ABC Company will be able to make a decent profit if they can increase Sales.

The owner should concentrate their energy on advertising and bringing in new business.

ABC Company

Now, let’s look at an example of XYZ Company, which has the same Sales and Fixed Expenses as ABC company, but is experiencing a loss. The business owner is likely frustrated, perhaps not knowing what the problem is, and thinking that if they can increase Sales, they will be able to finally start making a profit.

By running the same calculation, we get Variable Expenses $4,000 / Total Income $4,700 = 85% of Sales. It will be very difficult for this business to ever make a profit because it has thin margins. This is a term used to describe when the Variable Expenses are high in relation to Sales, and so there is only a thin margin left of profit before the Fixed Expenses are paid. When we run the same projection of 25% Growth, the result is only a 14% increase to Net Profit. If there are no drastic changes, the only way that XYZ Company will ever make a profit is to have a very high volume of sales.

The owner should use this information to make important business decisions such as  Re-Pricing Products & Services at a higher level and/or finding cheaper suppliers or materials for the Variable Expenses. It would be beneficial to focus energy on this before pushing to increase Sales.

XYZ Company

I hope this information has been helpful! Let me know your favourite ways to filter and analyze your QuickBooks Online Profit & Loss Report in the comments!

*SUMMER PROMO* Coastal Tax is offering a 5% discount on T2 Corporate Tax Preparation for NEW clients already using QuickBooks Online for their bookkeeping. Mention this offer when you Contact Alicia to set up a free consultation.

About the Author:


Alicia Loewen is a certified QuickBooks Online ProAdvisor and the owner of Coastal Tax and Accounting Services on Vancouver Island, BC. Coastal Tax is a modern accounting firm and offers all services remotely using online and paperless software to make bookkeeping and tax preparation as painless as possible.


NOTE: The financial information represented above is from a SAMPLE company. Coastal Tax and Accounting Services takes the confidentiality of our clients’ personal information very seriously and would never share sensitive information with anyone.

10 Steps To Start Your Small Business Bookkeeping Off Right

Starting a small business is an exciting endeavor! You’ve come up with a great idea and now you’re ready to get organized. Follow these 10 steps to success to get your small business bookkeeping started on the right track:

small business bookkeeping

  1. Register for a business name and numberOne Stop Business Registry

    • You will want to make sure that your business name is not already in use so that yours will be unique in the market.
    • You don’t need to see a lawyer to start a sole proprietorship business but you should if you plan to start an incorporated business. When you register your name online for a business account number, you can also register a GST or Payroll account at the same time, if necessary. (See Steps 4 & 10)
  2. Get a business bank account

    • Separate all your business banking from your personal banking. Do not use the business account to pay for your personal expenses and vice versa.
    • Try to avoid withdrawing cash from this account – if you need some money for personal use, write yourself a cheque from the business and call it a “shareholder draw” in the memo. If you need to add more funds to the business account, do an online transfer or write a cheque from your personal account and write “shareholder loan” in the memo.
    • Try to avoid using cash to pay for business expenses as this is harder to track.
  3. Determine if you need a business credit card or business loan

    • Speak with your banker about financing options with a low interest rate.
    • As above, only use your business credit card for business expenses.
  4. Find out if you should be charging GST

  5. Find out if you should be charging PST

  6. Create sales invoices

    • A sales invoice just needs to have the following info (as a minimum): Your business name, the customer’s name, date, invoice number (must be unique and should be sequential, ie. Inv#1001, Inv#1002), a short description of the product or service with pricing, and total.
    • If you are charging GST or PST on your invoice be sure to separate out these charges on the bottom before the final total.
    • A simple carbon copy invoice book from any office supply store will do fine in a pinch. For a more professional look, use computerized versions with your logo and invoices prepared from software and emailed directly to your clients.
  7. Use a bank deposit book

    • Resist the urge to make ATM deposits as this makes it difficult for you or your bookkeeper to match up deposits to sales invoices.
    • In your business deposit book, write the last name of the customer and cheque number beside the cheque amount.
    • An electronic option for this is to use a banking app to deposit individual cheques. Since there is only one cheque in the deposit total, it will be easier to match up to the correct customer invoice.
  8. Keep all business receipts

    • Keep all your business receipts in the same spot! A folder or a box would do fine. If you are doing your own bookkeeping, you may want to separate them into envelopes by expense category (e.g. gas, supplies, meals).
    • Yes, all of your expenses should be displayed on your bank or credit card statement, but this is not enough backup should your business face a CRA audit. Also, technically, you are not allowed to claim back the GST on expenses if you don’t have the physical receipts.
    • Alternatively, there are softwares that will replace the need to keep paper copies of receipts! Contact Coastal Tax for more info about electronic document storage as part of your bookkeeping.
  9. Track expenses

    • Hire a bookkeeper or learn to do it yourself. I recommend cloud-based accounting software such as QuickBooks Online. Contact Alicia for a quote on a monthly bookkeeping service package.
    • Another option is to track the expenses in an excel spreadsheet. You will need to include the date of purchase, vendor name, description of the item, and the amount.
    • If you are registered for GST, you will need to separate the GST amount from the expense total (i.e. your final total for “Supplies” should be the cost of supplies before GST). However, you do include any PST paid in the expense total. This is easier to do using bookkeeping software.
  10. Determine if you will be hiring employees

    • Understand that you are legally required to follow Employment Standards rules for payroll. You can learn to do the payroll yourself, but with complicated rules, it is much easier to have an experienced Payroll Administrator do this for you.
    • Learn about your responsibility for payroll source deductions. See my related post The Basics of Source Deductions.
    • You are also required to register for and pay WCB premiums.

Here is another great resource – a checklist to follow from Small Business BC which covers some non-financial steps as well! Small Business BC Starting Your Business Checklist

Until next time!


About the Author:


Alicia Loewen is a certified Platinum QuickBooks Online ProAdvisor and the owner of Coastal Tax and Accounting Services on Vancouver Island, BC. Coastal Tax is a modern accounting firm and offers all services remotely using online and paperless software to make bookkeeping and tax preparation as painless as possible. Contact Alicia to set up a free consultation.