GST/HST registration is one of the first compliance questions Canadian IT contractors face as contract revenue grows. The rules are specific, and the uncollected-tax risk is not widely understood.
The CAD $30,000 Small Supplier Threshold
Most Canadian IT contractors are required to register for GST/HST once they stop being small suppliers. The regular small supplier threshold is CAD $30,000, measured across any single calendar quarter, or across the previous four or fewer consecutive calendar quarters.
The threshold applies to revenue from worldwide taxable supplies, including zero-rated supplies, from the contractor and associated persons. It is based on revenue before expenses, not net income. Revenue from exempt supplies does not count toward the threshold, and CRA’s calculation also excludes items such as sales of capital property, goodwill, and supplies of financial services.
The registration and collection date depends on how the threshold is crossed:
- More than CAD $30,000 in one calendar quarter: you stop being a small supplier on the supply that makes you exceed the threshold. Your effective registration date is no later than that supply, and GST/HST applies to that supply and later taxable supplies.
- More than CAD $30,000 over the previous four or fewer consecutive quarters, but not in one quarter: you remain a small supplier until the end of the month following the quarter in which you exceeded the threshold. Your effective registration date is no later than the first taxable supply you make after you are no longer a small supplier.
The Uncollected Tax Problem
The most misunderstood aspect of the registration threshold is that the obligation to collect GST/HST is based on the effective registration date under the small supplier rules, not on the date CRA finishes processing the account.
If you invoice a client for CAD $6,500 that pushes your taxable supplies in that calendar quarter over CAD $30,000, you owe GST/HST on that invoice and every taxable invoice after it, even if you have not yet registered with CRA.
If instead you cross CAD $30,000 only because several smaller quarters add up over the rolling four-quarter test, the result is different. You generally remain a small supplier until the end of the month following the quarter in which the threshold was exceeded, and you start charging GST/HST on taxable supplies made after that point.
Registration through CRA’s Business Registration Online portal can take time. The collection obligation does not wait.
Clients in commercial activity can often recover GST/HST they pay through input tax credits if they have proper documentation, so a late charge may be less sensitive for business clients than for consumers. The problem is yours: if you were required to charge GST/HST and did not collect it, you still have to account for the tax.
What Registration Requires
Once registered, you are required to:
- Collect GST/HST on taxable supplies at the applicable rate (5% GST in non-HST provinces and territories, 13% HST in Ontario, 14% HST in Nova Scotia, and 15% HST in New Brunswick, Newfoundland and Labrador, and Prince Edward Island)
- File GST/HST returns on the frequency assigned by CRA (annual for small businesses, quarterly or monthly for larger operations)
- Remit the net amount after claiming input tax credits on eligible business expenses
- Maintain records to support your returns
Input Tax Credits
Registration is not purely a cost. Once registered, you can claim input tax credits (ITCs) on GST/HST you pay on business expenses: software subscriptions, office supplies, professional fees, and other inputs.
If your clients are other businesses, they recover the GST/HST you charge through their own ITCs. For business-to-business service providers, registration is often cost-neutral from the client’s perspective and generates ITC refunds on your side.
Voluntary Registration Before CAD $30,000
You can register voluntarily before reaching the threshold. This makes sense when:
- Most of your clients are GST/HST-registered businesses who will claim back what you charge
- You have significant business expenses with GST/HST you want to recover
- You expect to cross the threshold soon and want to avoid the uncollected-tax timing problem
Voluntary registration commits you to all the same filing and remittance obligations as mandatory registration.
Exempt vs. Zero-Rated vs. Taxable Supplies
Not all self-employment income attracts GST/HST.
Exempt supplies do not attract GST/HST and registrants cannot claim ITCs on related expenses. Examples include most health services, long-term residential rent, and most financial services.
Zero-rated supplies are taxed at 0%, which means GST/HST is charged at zero but you can still claim ITCs on related expenses. Examples include exports and certain agricultural and fishing products.
Most professional service income for IT contractors and tech consultants is taxable unless a specific zero-rating rule applies. The treatment depends on the client, the service, and where the service is supplied.
Filing Frequency
CRA generally assigns an annual reporting period when you register, but the reporting period is based on annual taxable supplies and can change as revenue grows:
- CAD $1.5 million or less: annual, with the option to elect quarterly or monthly
- More than CAD $1.5 million and up to CAD $6 million: quarterly, with the option to elect monthly
- More than CAD $6 million: monthly
Annual filers generally make quarterly instalment payments only when their net tax for the previous fiscal year was at least CAD $3,000 and their current-year net tax is also at least CAD $3,000. A new annual filer can have an instalment obligation in the next fiscal year if a short first GST/HST filing year prorates to CAD $3,000 or more and the current-year net tax is also expected to meet the threshold.
Multi-Province Considerations
If your clients are in provinces or territories without HST, the federal GST rate is 5%. HST applies in Ontario (13%), Nova Scotia (14%), New Brunswick (15%), Newfoundland and Labrador (15%), and Prince Edward Island (15%). Quebec has a separate QST system.
If you work with clients across multiple provinces, the place-of-supply rules determine which rate applies.
GST/HST obligations interact with income tax planning and, for incorporated contractors, the corporate return. For IT contractors with multi-province clients, U.S. client income, or questions about ITC claims on specific expenses, working with a CPA who handles GST/HST alongside the personal and corporate return ensures the filings reconcile and the compliance obligations are tracked together.