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Registering a tow truck business in B.C.
Expert: Lloyd Lindsay
Sarah asked:
If I am setting up a small tow truck business in a small town in B.C. and I don't think that the business will make $30,000 this year. Do I have to register it for GST/HST? Will the new HST legislation make it necessary to register or is it still optional?
Lloyd Lindsay answered:
Effective July 1, 2010, British Columbia (B.C.) became an HST province where the Federal government collects and administers both the Federal and provincial portions of the HST tax. For B.C., the combined tax rate is 12 per cent: five per cent goes to the Federal government, and seven per cent to B.C.
B.C. exempts some things that the GST does not. For these items, only the Federal five per cent applies. However, the full 12 per cent HST applies to tow truck services.
REGISTERING FOR GST/HST:
The rules requiring you to register for either GST or HST are the same. If you were a registrant under the GST, you automatically are registered under B.C.'s new HST.
Businesses that qualify as a 'small supplier' do not have to register under the GST/HST. For them, it's optional. Non-registered businesses do not charge GST/HST on their sales, but cannot recover the GST/HST they pay on their purchases.
WHAT IS A 'SMALL SUPPLIER'?
Your tow truck business provides 'taxable supplies.' Generally, a business qualifies as a 'small supplier' if its total revenues from taxable supplies (before deducting expenses) do not exceed $30,000 ($50,000 for public service bodies):
- in a single calendar quarter, or
- over four consecutive calendar quarters
If you exceed the limits, you are no longer a small supplier and must register for GST/HST. An individual who owns two or more unincorporated businesses must add the total 'taxable supplies' sold by them in determining whether the limits were exceeded. If they were, the individual must register under his/her name, and the single registration would apply to those businesses.
SHOULD I REGISTER IF I QUALIFY AS A 'SMALL SUPPLIER'?
If your business qualifies as a 'small supplier' and registration is optional, here are a few questions you might want to ask your accountant:
- How much GST/HST that I pay to my suppliers can I recover if I register?
- Are most of my customers registered and eligible for a refund of the GST/HST I charge them, or are they ineligible?
- What are the additional accounting and administrative costs I might incur if I delay registration and sales volumes suddenly increase?
- What business image do I have if I am not registered?
- Will I lose customers by not being registered?
After reviewing the above questions, many businesses do register.
About the author
Lloyd Lindsay is a CA, a licensed Public Accountant, Chartered Professional Accountant, and a Certified Management Consultant. He completed the CICA In-Depth Tax Course in 1985 and has been in public practice for over 40 years. Also, from time to time, he teaches on a contract basis.
Lloyd is a member of the Personal Computer Club of Toronto and has hosted its Microsoft Office Special Interest Group for many years.
In addition to providing tax, accounting, and auditing services, Lloyd provides presentations on those topics and on using accounting software, PowerPoint, and MS Office programs.