In this blog we will explain why we think the answer is yes. And these comments apply whether you are operating as a proprietorship or a corporation.
You may know that a business is required to get a GST number if total sales over any 4 consecutive calendar quarters exceeds $30,000. But there are advantages to getting a GST sooner – preferable at the start of your business.
First of all, here is how GST works for the usual small business model:
- If you sell a widget for $1,000 you add $50 GST and collect $1,050. Now you owe Canada Revenue (CRA) $50 but it hasn’t cost you anything because you’ve collected the $50 from your customer.
- If that widget cost you $500 you also paid $25 GST for a total cost of $525. The $25 you paid to your supplier will be passed on to CRA. CRA doesn’t need that $25 again so you get to deduct it from what you owe CRA.
- In summary
o You owe CRA what you collect $50
o You get to deduct the GST you paid out $25
o You owe CRA a net of only $25
So, having a GST number is to your advantage because you collect the extra money you owe from your customers so you are not out of pocket. Plus, you get to recover the GST you pay out which you can’t do if you don’t have a GST number. In fact, if you have a lot of up-front costs to get set up you might be eligible for a GST refund.
Everyone expects to pay GST so it is not likely that you will lose any sales because you have a GST number. And, NOT having a GST number might be a disadvantage because it indicates that you are a small company and doesn’t look very professional.
So, our recommendation is to get a GST number as soon as you get your business set up.
Give us a call. We will help you figure out just how beneficial having a GST number for your business could be.