Understanding HST: A Guide for Canadian Small Businesses

If you’re running a business in Canada, chances are you’ve heard about Harmonized Sales Tax (HST). For many entrepreneurs, though, the rules around charging, collecting, and remitting HST can feel complicated, and mistakes can be costly.

At Alphex Accounting, we work with business owners every day to simplify tax compliance. Here’s what you need to know about HST and how to manage it properly.

What Is HST?

HST is a consumption tax that combines the federal Goods and Services Tax (GST) with provincial sales tax in certain provinces. Instead of charging two separate taxes, HST rolls them into one.

As of 2025, provinces that use HST include:

• Ontario

• New Brunswick

• Newfoundland and Labrador

• Nova Scotia

• Prince Edward Island

Other provinces and territories still apply GST (5%) plus their own provincial sales tax (PST/QST) separately.

When Do You Need to Register for HST?

You must register for an HST account if your business makes more than $30,000 in taxable revenue in a 12-month period. Below this threshold, registration is optional, but sometimes beneficial, since it allows you to claim input tax credits (ITCs).

Charging and Collecting HST

Once registered, you’re required to:

• Charge HST on all taxable sales and services.

• Show the HST amount separately on invoices.

• Keep proper records of all HST you collect.

Input Tax Credits (ITCs)

The good news: businesses can recover the HST they pay on business expenses through Input Tax Credits. For example, if you buy office supplies or pay for software, the HST on those purchases can be claimed back when you file your return.

Filing and Remitting HST

HST returns can be filed monthly, quarterly, or annually, depending on your revenue. Deadlines are strict, late filings can lead to penalties and interest charges.

With cloud accounting platforms like Xero, tracking and filing becomes much easier. Automated tax reports help ensure accuracy and keep you ahead of deadlines.

Common Mistakes to Avoid

• Not registering on time after crossing the $30,000 threshold.

• Mixing personal and business expenses, making it hard to claim ITCs correctly.

• Missing filing deadlines, which often leads to unnecessary penalties.

HST doesn’t have to be overwhelming. With the right systems in place, and the right accountant on your side, it becomes just another smooth part of running your business.

At Alphex Accounting, we help Canadian business owners stay compliant, maximize ITCs, and keep HST reporting stress-free.