Saturday, June 12, 2010

The Business Chat - HST

Hello people!

My name is Catherine Winter and my company is Sailorgirl Jewelry. For 7 years I've made my living as a lampwork artist and jewelry designer. No I didn't win the lottery, inherit money or marry money (and I've been asked all those questions). I actually pay my bills with my jewelry and beads. When I first learnt lampworking (at Beadfx) I said "I'm going to make a living making beads". There was silence. Several years later Dwyn suggested I lead a workshop and share how I'd managed it. For the past 3 years I've taught Start Your Own Microbusiness and How to Have a Successful Craft Show at Beadfx. And now I'll be writing a weekly post here sharing business information and craft show tips. Grab yourself a beverage and join the fun.

I want to begin my series with a disclaimer. I could write a blueprint of how I built my business, you could follow it and fail. That's because you are not me. What works for one person may not work for another. Here's your first tip, there are no guarantees in your crafty endeavor. If you want a guarantee put down your pliers and buy yourself a franchise business (would you like fries with that?). While there are no guarantees there are some steps and guidelines that will make your success easier. These I can help you with. Sometimes just knowing that there are others in your shoes is comforting. If you make a mistake, fear not, it's been made before and you'll make more. Just pick yourself up, continue on and learn from the mistake. The bottom line is that this is your business and you have to make your own business decisions. I'm here to help you make informed decisions.

Right now one of the hottest (yawn) topics in the Canadian crafty business world is the implementation of the HST - Harmonized Sales Tax. On April 1, 1997 the Atlantic provinces of New Brunswick, Newfoundland and Nova Scotia implemented a 15% HST. Over the years the GST rate has fallen by 2%, which means these Atlantic provinces currently pay a 13% HST. On July 1st, 2010 British Columbia and Ontario will also be adopting HST at 12% and 13% respectively.

So what does this mean for you, the craftista? It means that as of July 1, 2010 if you are currently registered for GST - meaning your sales are greater than $30,000 annually - now you must charge HST. If your current sales are less than $30,000 and you have not voluntarily opted to collect HST you cannot charge HST to anyone.

Essentially there are 2 scenarios here:

1. Your annual sales are greater than $30,000. You are registered for GST.
  • You sell wholesale or consignment. Currently you charge GST 5% and no PST. Now you charge HST, 12% in BC and 13% in ON.
  • You sell retail. Currently you charge GST 5% and PST 7% in BC, 8% in ON. Now you charge HST, 12% in BC and 13% in ON.

2. Your annual sales are less than $30,000 and you are not registered for GST.

  • You sell wholesale or consignment. Currently you charge no tax. Now you charge no tax.
  • You sell retail. Currently you charge PST 7% in BC, 8% in ON. Now you charge no tax.

Supplies bought wholesale are currently PST exempt when you have a vendor permit. As of July 1 you will be paying HST on all supplies. If you are registered to collect HST you will be reimbursed the HST you pay on all business expenses (including HST on hydro, commercial rent, phones etc as well as on supplies).

To collect HST you must be registered with the government. If you are already registered to collect GST your HST number is your GST number. You don't have to do anything. If you are not currently collecting GST and want to collect HST you need to register. At the bottom of this post are instructions on registering.

Why would anyone selling less than $30,000 volunteer to collect tax? Well, once you are registered you are entitled to a refund of all the HST on business expenses. This is called Input Tax Credits - ITCs. If you spend $5,000 a year on business expenses (supplies, internet connection, classes etc) you have paid $650 in HST. Wouldn't it be sweet to get that back? (think how many beads you could buy for $650!!!) There comes a point where it just makes sense to register and collect even if your sales aren't $30,000.

For more information or to register for an HST number visit www.cra.gc.ca. In the middle of the page (under the picture of the Minister) there are 3 tabs - Online Services, Individuals, Business. Click Businesses. Click Business Registration. Scroll down to Business Registration Online. Click Register Now. another website with good information is www.rev.gov.on.ca. Between these 2 websites you can find all the answers if you have the patience of a saint. I found it much easier to call 1-800-959-5525. Just keep pressing buttons until you find a human.

Next week we'll discuss something way more fun, how about weatherproofing your outdoor booth?

6 comments:

dragonjools said...

Awesome info - welcome to the beadFul Life and I look forward to reading more!

And yes - I'm sure we'd all like to hear your thoughts on weatherproofing too.

What do Torontonians call 2 days of rain that follows 5 days of nice weather? The weekend!

Jody Lee said...

Thank you so much for clarifying that!!

jen said...

Welcome Catherine! Great post - and I'm sure you've cleared up a great deal of confusion surrounding the dreaded HST ;-)

redstarcafe said...

Catherine, that is great information. I'm looking forward to your posts on The Beadful Life.

Beth Ann said...

Great post, Catherine.... Look forward to reading more!

Marilyn said...

Excellent information!
Another key is knowing the rules of the province in which your customer takes delivery of your product.