{"id":11269,"date":"2021-11-08T19:00:07","date_gmt":"2021-11-09T00:00:07","guid":{"rendered":"http:\/\/www.irasmithinc.com\/blog\/?p=11269"},"modified":"2021-11-08T11:55:14","modified_gmt":"2021-11-08T16:55:14","slug":"calculate-hst","status":"publish","type":"post","link":"https:\/\/irasmithinc.com\/blog\/calculate-hst\/","title":{"rendered":"TO CALCULATE HST IS EASY: PAYING IT AND SOLVING OTHER GIGANTIC COVID-19 BUSINESS DEBT PROBLEMS ARE NOT"},"content":{"rendered":"
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calculate hst<\/strong><\/em><\/figcaption><\/figure>\n

We hope that you and your family are safe, healthy and secure during this\u00a0COVID-19 pandemic<\/em><\/a>. Ira Smith Trustee & Receiver Inc. is absolutely operational and Ira, in addition to Brandon Smith, is readily available for a telephone consultation or video meeting.<\/p>\n

If you would prefer to listen to the audio version of this Brandon Blog, please scroll to the very bottom of the page and click play on the podcast.<\/p>\n

Calculate HST<\/em> and Canadian small business<\/strong><\/h2>\n

I read two business reports this week, one from the Canadian Federation of Independent Businesses<\/em> (CFIB<\/em>) and one from the Canada Revenue Agency<\/em> (CRA<\/em>).\u00a0 They both contain troubling information.\u00a0 The combined effect is bad news<\/em>.<\/p>\n

CRA reports that businesses owe $14.3-billion in unpaid sales tax.\u00a0 CFIB estimates that small businesses in Canada owe a collective $139 billion in debt due to the COVID-19 pandemic<\/em> as of August 2021.<\/p>\n

Almost three-quarters of small businesses that took on debt expect it to take more than a year to repay. For businesses in the hospitality sector, the number jumps to 87 percent, with most saying it will take longer than two years to pay it off.\u00a0 Nearly a quarter worried about ever being able to pay off their debts.<\/p>\n

These two reports clearly illustrate that one of the debts Canadian business owners<\/em> have amassed is collected but unremitted Harmonized Sales Tax<\/a><\/em> (HST<\/em>).\u00a0 This Brandon Blog will not only describe how to calculate HST<\/em><\/strong> but also explain what will happen if you do not pay it over to CRA<\/em>.<\/p>\n

Calculate HST<\/em> Amounts in Sales<\/em> and Purchase Documents<\/em><\/strong><\/h2>\n

You must register for GST\/HST<\/em> if you bill more than $30,000 per year. You do not need to register if you don’t exceed this amount. The HST<\/em> calculation varies according to the province or territory you operate in. Several provinces have harmonized their provincial sales tax<\/em> with the Goods and Services Tax<\/em> (GST) and charge HST<\/em> on taxable goods and services. GST and provincial sales tax<\/em> have to be charged in provinces with PST; GST is calculated on the price of each taxable sale<\/em> of goods or services before PST is added.<\/p>\n

HST<\/em> is calculated on the revenue from each taxable sale<\/em> that is collectible or collected. The HST<\/em> on each taxable supply <\/em>produces an input tax credit <\/em>that can then be deducted from the HST <\/em>owing. HST <\/em>on taxable sales<\/em> less input tax credits from taxable supplies <\/em>is the net amount of HST<\/em> due or refund for the period. \u00a0Your HST<\/em> return may need to be filed annually, quarterly, or monthly, depending on how large your business is as measured by total sales and therefore sales taxes<\/em> also.<\/p>\n

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Calculate HST is just one part of small business debt and the COVID-19 impact<\/strong><\/em><\/h2>\n

In their August 2021 research study<\/a>, the CFIB uncovered a variety of issues that show the Canadian small business sector is struggling. They found:<\/p>\n

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  1. It is estimated that 71% of Canadian small business owners<\/em> have taken on new debt loads<\/em> to deal with the effects of the COVID-19 pandemic<\/em>.<\/li>\n
  2. CFIB estimates that total Canadian small business debt loads<\/em> related to the coronavirus is around $139 billion, and 76% of businesses that took on debt said it would take them more than one year to repay it.<\/li>\n
  3. Governments should continue business relief measures as government support is winding down since Canadian small businesses are carrying such a burden and are having difficulty regaining their footing.\u00a0 Rent assistance <\/em>is\u00a0one such support program.<\/li>\n
  4. Only 39% of small businesses in Canada are currently making sales they consider to be normal for this time of year, despite recent improvements.\u00a0 Most continue to experience declines in revenue.<\/em><\/li>\n
  5. About 17% of small businesses in Canada have sales that are half or less of what they should be.<\/li>\n
  6. Four in five businesses are using one or more sources of funding to cope with COVID-19.<\/li>\n
  7. In the arts, recreation & information, and hospitality sectors, 9 of 10 businesses are using some federal, provincial, or other funding to cope with COVID-19.<\/li>\n
  8. In three out of five cases, government relief programs replace less than 30 percent of the COVID-19 shortfall.<\/li>\n
  9. Scaling back federal relief programs comes too quickly for most business owners<\/em>.<\/li>\n
  10. According to half of the entrepreneurs, repaying their debt is the biggest challenge their business faces on the road to recovery.<\/li>\n<\/ol>\n

    Now for the CRA<\/em> news release that has to do not only with how to calculate HST<\/em>, but who is and is not paying their HST<\/em>.<\/p>\n

    How to calculate HST is only the first part:\u00a0Businesses owe $14.3-billion in unpaid sales tax, Canada Revenue Agency says<\/strong><\/em><\/h2>\n

    The number of companies falling behind on federal sales tax remittance<\/em> indicates financial distress, as companies battle the pandemic and supply chain issues.\u00a0 In March 2020, when pandemic restrictions began, the nation owed $11.5 billion in GST and HST<\/em> to the government. By September 2021, it owed $14.3 billion, an increase of 24 percent over that amount.<\/p>\n

    As of 2020-21, the CRA has received about 500,000 fewer sales tax returns<\/em> than the year prior. There were approximately 105,000 fewer sales tax filers, the agency reports.\u00a0 Despite the fact that so many businesses are still operating at some level, they are not even bothering to file their tax returns<\/em>.<\/p>\n

    Most businesses file their HST <\/em>returns on either a once-a-year reporting period<\/em> or on a quarterly reporting period<\/em>.\u00a0 Some larger companies report and remit monthly.\u00a0 Quarterly remitters with annual taxable income between $1.5 million and $6 million showed the largest drop in returns by reporting period<\/em>.<\/p>\n

    Therefore, it is clear that Canadian businesses are using the tax amounts<\/em> collected as another source of financing since the pandemic hit.\u00a0 There is no mention of HST<\/em> in the CFIB study.\u00a0 HST<\/em> collected but not remitted was not even considered as a source of financing, which it is.<\/p>\n

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    Calculate HST<\/em> but if you don’t pay, it is a deemed trust<\/em><\/strong><\/h2>\n

    Regardless of the business legal structure, the GST\/HST<\/em> amounts you collect from your customers are considered a deemed trust<\/em> in favour of the federal government.\u00a0 In an operating business, it takes precedence over whatever debts you owe to other creditors, including secured creditors.\u00a0 The CRA can still get payment from your bank even if the bank does not lend money to you. They can go to the bank where you keep your business funds and get payment there.\u00a0 All that is explained in my blog post about Canada v. Toronto-Dominion Bank<\/a><\/em>.<\/p>\n

    However, the CRA has the following options:<\/p>\n

CRA has created an HST calculator<\/a><\/em>\u00a0to help you calculate HST<\/em>.<\/p>\n