Registering for GST/HST before you have to

Below $30,000 in taxable sales, registering for GST/HST is optional. Plenty of new businesses register anyway. Whether that's a good idea depends mostly on who your customers are and how much you're spending to get started.

What registering early means

A voluntary registrant has the same obligations as everyone else:

• 01You charge GST (5% in B.C.) on your taxable sales from your registration date.
• 02You file returns every reporting period, even when there's nothing to report.
• 03You can claim input tax credits for the GST you pay on business purchases.
• 04You stay registered for at least one year before you can ask the CRA to cancel.

Why some businesses do it

• 01Getting GST back on start-up costs. Equipment, a vehicle, a website, inventory: if you spend heavily before revenue arrives, ITCs can return 5% of all of it. New registrants may also be able to claim ITCs on capital property and inventory already on hand when they register.
• 02Your customers are businesses. GST-registered clients claim back the GST you charge them, so it costs them nothing, and some prefer suppliers with a GST number.
• 03You'll cross $30,000 soon anyway. Registering from day one avoids repricing, re-invoicing, and the 29-day registration scramble mid-year.

When it backfires

• 01You sell to consumers. The public can't claim GST back, so registering either raises your prices by 5% or comes out of your margin, while unregistered competitors charge nothing.
• 02Your costs are low. A service business with few taxable purchases has little GST to claim back, so registering mostly adds paperwork.
• 03You aren't ready for the filing. Missed returns and late payments carry penalties and interest whether you had to register or not.

A quick way to decide

Register early if most of these are true:

• 01Most of your customers are GST-registered businesses.
• 02You're spending meaningfully on equipment, inventory, or other taxable purchases this year.
• 03You expect to pass $30,000 in the next year or two.
• 04You (or your bookkeeper) can keep up with the returns.

If you mostly sell to the public and your costs are modest, waiting until you cross the threshold is usually the better choice.