Small supplier threshold

The same $30,000, and two different consequences

Canada has one number and two tests, and almost everything written about it treats them as the same test. They are not, and the difference is money.

Exceed $30,000 in a single calendar quarter and you are no longer a small supplier immediately. The CRA is specific: you have to charge GST or HST on the supply that made you exceed $30,000, and your effective date of registration is no later than the day of that supply.

Exceed $30,000 across the previous four consecutive quarters, but not in any single one of them, and you stop being a small supplier at the end of the month following the quarter in which you crossed. Registration takes effect no later than the first supply after that.

So two businesses turning over $40,000 a year get different answers. The one that had a quiet year and one big project is liable on an invoice it has already issued, out of its own margin. The one that grew evenly gets a month and a bit to organise itself. Nothing about their size differs. Only the shape of their year.

Which makes the single-quarter route the one to watch

The reason it hurts is that you cannot see it coming. A rolling annual test gives you warning: the total creeps up and you can watch it. A single-quarter test can be tripped by one contract signed on a Tuesday, and the invoice that trips it is the invoice that needed the tax on it.

The tool above works out what a single further sale would have to be to cross inside the current quarter, which is the number worth having before you quote rather than after you invoice.

The quarters are not your quarters

The CRA defines a calendar quarter as three months beginning on the first day of January, April, July or October. That is the only definition in play.

A business with a fiscal year ending 30 June has quarters running July to September, October to December, January to March and April to June, which happens to line up. A business with a year ending 31 March does not line up at all, and one with a year ending in May lines up with nothing. The test does not care.

This is the same class of trap as the British one, where the rolling twelve month test is applied at the end of any month and never at your accounting year end. Different mechanism, identical failure: the business is watching its own calendar while the test watches a different one. Our VAT threshold tracker covers the UK version.

What counts is wider than the business, and wider than Canada

The footnote does more work than the table, and it says four things worth reading twice.

• All revenues before expenses. Gross, not profit. A business with $35,000 of revenue and $30,000 of costs is over the threshold and has made $5,000.
• Worldwide taxable supplies. Not only what you sold in Canada. A Canadian consultant with mostly American clients still counts all of it.
• Zero-rated supplies count. Basic groceries are taxable at 0%, and 0% is still taxable, so they go in the total even though no tax is charged on them.
• Your associates' revenues too, if you were associated at the beginning of that calendar quarter. Two small companies under common control are counted together whether or not they trade with each other.

The association rule is the one that catches people, partly because it is tested at the beginning of the quarter rather than continuously, and partly because nobody thinks of a separate company as part of their turnover.

Three things are excluded: supplies of financial services, sales of capital property, and goodwill from the sale of a business. So selling a van does not push you over, and neither does selling the business itself. That last exclusion matters more than it sounds, because otherwise a one-off sale of a business would make its final quarter look enormous.

Registering is not only a cost

The instinct is to stay under the threshold as long as possible, and for some businesses that is right. For others it is expensive.

A small supplier charges no GST or HST, and also cannot claim input tax credits on the tax it pays on its own purchases. A trade buying materials at 13% HST in Ontario is paying that tax and keeping none of it. Register, and the tax on purchases comes back, while the tax charged to customers is money that was never yours.

So the question is not really "do I have to" but "which way round am I". A business selling mostly its own labour to consumers usually finds registration adds tax to its prices with little to reclaim. A business buying and reselling, or buying a lot of materials, often finds the opposite. That is why voluntary registration exists at all, and why the effective date rules for voluntary registration are gentler: usually the day you request the account, or up to 30 days before.

Three markets, three completely different tests

This is the third page in the same family, and the numbers are the least interesting part of the comparison.

• United Kingdom. A rolling twelve months, tested at the end of any month, plus a separate forward look asking whether the next 30 days alone will exceed the threshold. Twelve trigger dates a year and a thirteenth that can fire any day.
• Australia. Current turnover against projected turnover, and the ATO says outright that being at or above the threshold on current turnover does not require registration if projected turnover will be under it. A business that had one enormous year and is back to normal work does not have to register.
• Canada. Fixed calendar quarters, and the consequence depends on which of the two tests you failed.

A single page with a country switch would have to hide two thirds of its fields whichever market you picked, and would have to pretend these are the same question asked three ways. They are three different questions with the same purpose.

There is no American member of this family, and it is not a gap. The United States has no federal consumption tax, so there is no national threshold to be over or under. Each state decides when a seller from elsewhere has to register and collect, which makes it up to fifty separate questions and none of them the one this page answers.