A significant task for the new business owner is ensuring their business properly complies with the extensive tax and information filing requirements imposed by various government agencies. Stiff penalties are commonly assessed if the required forms and returns are not properly prepared and timely filed. There are several forms required to be filed when the business is started. While this chapter is not intended to be an all-inclusive list of the filing requirements, it does summarize some of the more prominent requirements common to most businesses. Many industries have specific filing requirements which are not part of this text but which, nevertheless, must not be overlooked. Professionals with experience in your industry should be consulted to assure that any such filings are properly handled.
Canada Revenue Agency
All tax forms filed with the Canada Revenue Agency require the use of a Federal Business Number. This number is obtained by filing Form RC1 “Request for a Business Number” with the Canada Revenue Agency.
The Business Number is a nine digit account identifier which is used for all programs. Each program uses the same Business Number but with different identifiers, such as:
- RT: GST/HST
- RP: Payroll
- RC: Corporate Income Tax
- RM: Import/Export
- RZ: Dividend/Interest Payments
The required program accounts may be applied for when registering for the Business Number or later as required. Most filings with the Canada Revenue Agency come under the headings of income and payroll taxes. Payroll tax requirements are detailed in Chapter Four. Income tax filing requirements and tax planning are discussed in Income Taxes.
Business License
To operate a business you must obtain a business license. Applications can typically be obtained at the city hall where your business is located. At the time of filing the application, a fee must be paid which can vary depending on the city and the size of the business. The license is issued immediately, and must be posted in plain sight at your place of business.
Goods and Services Tax (GST)
This is a tax on sales levied by the Government of Canada. Most businesses must be registered and are required to collect this tax. There are exceptions to the taxability of all goods and services. The exceptions are specific and should be discussed with your professional advisor. The tax collected by the business must be remitted to the Canada Revenue Agency either monthly, quarterly, or annually depending upon the rules that apply to each business. Tax paid by your business on goods and services it has purchased may be offset against the tax collected on its sales and the net amount remitted, or in some circumstances refunded by the Canada Revenue Agency. It is necessary to keep a record of all GST collected and paid on purchases in order to calculate the net tax to be remitted.
Provincial Sales Tax (PST)
Several provinces/territories levy a provincial/territorial retail sales tax (PST) or a harmonized sales tax (HST) which combines provincial and federal tax on the sale of certain goods. If your business will include the retail sale of goods (i.e. they are not for resale), you will be required to collect tax on the sale of “taxable goods” and remit it to the provincial government.
In order to accomplish this, your business must be registered with the taxation department of the provincial government, online or in person. For example, in British Columbia you can apply at the Service BC Centre which administers the Provincial Sales Tax Act, or online using eTaxBC.
The tax is collected at the time of sale, and is considered to be held in trust for the Minister of Finance of the province/territory until it is remitted before the end of the month following the month of the sale.
Although GST and PST appear to tax the same goods, there are many very important differences in the application of the two taxes. Canada Revenue Agency has published many explanations and instructions concerning this tax and they provide a telephone enquiry service to answer questions. Your accountant is available as a consultant on matters concerning GST and PST.
