For most small businesses in Ontario, GST/HST is the tax you interact with most frequently. You collect it on every invoice, pay it on most purchases, and remit the difference to the CRA on a regular schedule. It sounds straightforward, and conceptually, it is. But in fifteen years of working with small business owners across the Greater Toronto Area, our team at Cassar CPA has seen the same GST/HST mistakes come up over and over again.
Some of these mistakes are minor inconveniences. Others trigger penalties, interest charges, denied input tax credits, or CRA audits. The good news is that most are entirely avoidable with a basic understanding of the rules and some consistent bookkeeping habits.
This article walks through the most common GST/HST filing errors we encounter among Ontario small businesses, explains why they happen, and offers practical steps to prevent them. A few key numbers to keep in mind throughout: Ontario’s HST rate is 13% (combining the 5% federal GST and 8% Ontario provincial component), the small supplier registration threshold is $30,000, and the CRA’s prescribed interest rate on overdue remittances is 7% as of Q1 2026, compounded daily.
Mistake 1: Not Registering for GST/HST on Time
This is the most consequential mistake on the list. Under the Excise Tax Act, you must register for a GST/HST account once your worldwide taxable supplies exceed $30,000 in a single calendar quarter, or over any four consecutive calendar quarters. You have 29 days from the date you exceed the threshold to register with the CRA.
The problem is that many new business owners either do not track their revenue against the threshold carefully enough, or assume they can wait until the next fiscal year to register. If you cross $30,000 and do not register, you are still legally required to collect and remit HST on the supply that pushed you over the threshold. If you did not collect it from your customers, you owe it to the CRA out of your own pocket.
What we see in practice: A consultant hits $30,000 in revenue partway through the year but does not register until the following January. The CRA’s Non-Registrant Program identifies the gap, often through cross-referencing T1 or T2 income tax filings, and the business receives an assessment for HST that should have been collected, plus penalties and interest.
How to avoid it: Track your cumulative taxable revenue monthly, starting from the first dollar. Set a reminder well before you approach the $30,000 mark. If you anticipate exceeding the threshold, consider registering voluntarily. Voluntary registration lets you start claiming input tax credits on your business expenses immediately, and ensures you are compliant from the outset. You can register through the CRA’s Business Registration Online portal or by submitting Form RC1.
Mistake 2: Confusing Taxable, Zero-Rated, and Exempt Supplies
Not everything you sell or buy is subject to HST at the standard 13% rate. The Excise Tax Act classifies supplies into three categories, and getting the classification wrong affects both what you charge on your invoices and what you can claim back as input tax credits.
Taxable supplies are subject to HST at the applicable rate. Most goods and services sold by small businesses in Ontario fall into this category.
Zero-rated supplies are technically taxable, but at a rate of 0%. Examples include basic groceries, prescription drugs, medical devices, and most exports. Importantly, if you make zero-rated supplies, you can still claim ITCs on your business expenses, which means you may receive a net refund from the CRA.
Exempt supplies are not subject to HST at all, and you cannot claim ITCs on expenses related to making exempt supplies. Common exempt supplies include most health and dental services, long-term residential rent, childcare services, and most financial services.
Why it matters: If you treat an exempt supply as taxable and charge HST to your clients, you must still remit that amount to the CRA, but your clients may question the charge or refuse to pay it. Conversely, if you treat a taxable supply as exempt and do not charge HST, you still owe the CRA the full amount. And if you claim ITCs on expenses related to exempt supplies, those credits can be denied on audit.
Healthcare professionals are particularly affected by this issue. Many medical and dental services are exempt from HST, but cosmetic procedures, administrative fees, and certain non-insured services may be taxable. The classification can be nuanced, and assumptions based on what seems intuitive are not a substitute for checking the rules.
Mistake 3: Claiming Input Tax Credits Without Proper Documentation
Input tax credits allow you to recover the HST you paid on eligible business expenses. But the CRA has specific documentation requirements that must be met before you can claim an ITC, and these requirements vary based on the size of the purchase.
For purchases of $30 or less, minimal documentation is required. For purchases between $30 and $150, the invoice must include the supplier’s name, the date, the total amount paid, and an indication that HST was charged. For purchases over $150, the invoice must additionally include the supplier’s GST/HST registration number, the buyer’s name or trading name, and the terms of payment.
What we see in practice: The most common issue is missing supplier registration numbers on invoices over $150. In a CRA audit, ITCs claimed on invoices that lack the required information can be denied outright, even if you genuinely paid the HST. Another frequent problem is claiming ITCs on expenses that are personal in nature or not related to the business’s commercial activities.
How to avoid it: Review your supplier invoices to ensure they meet the documentation requirements for the applicable purchase amount. If a supplier’s invoice is missing their GST/HST number, request an updated invoice before filing your return. Keep all supporting documents, both paper and digital, for at least six years from the end of the last tax year to which they relate, as required by the CRA.
Mistake 4: Charging the Wrong HST Rate on Inter-Provincial Sales
Ontario’s HST rate is 13%, but Canada’s sales tax landscape is not uniform. If your business sells goods or services to customers in other provinces, the rate you charge generally depends on the place of supply, typically where the customer is located or where the goods are delivered, not where your business is based.
For reference, the current rates across Canada include: Ontario at 13% HST; New Brunswick, Newfoundland and Labrador, and PEI at 15% HST; Nova Scotia at 14% HST (effective April 1, 2025); Alberta and the territories at 5% GST only (with no provincial component); British Columbia, Manitoba, and Saskatchewan at 5% GST plus separate provincial sales taxes; and Quebec at 5% GST plus 9.975% QST administered separately by Revenu Québec.
Getting the rate wrong in either direction creates problems. If you undercharge HST, for example, charging 5% GST to an Ontario customer instead of 13% HST, you still owe the CRA the full 13%. You will need to collect the shortfall from your customer or absorb it yourself. If you overcharge, you must remit the full amount collected to the CRA, though you may be able to issue a credit note to the customer.
How to avoid it: Confirm the place of supply for each transaction, particularly if you sell services across provincial lines. Set up your accounting software with the correct tax rates for each province. If your business regularly deals with customers in multiple provinces, getting professional guidance on the place-of-supply rules is a worthwhile investment.
Mistake 5: Filing Late or Missing the Deadline Entirely
Your GST/HST filing frequency is determined by the CRA based on your annual taxable supplies. Most small businesses are assigned either an annual or quarterly filing period. Missing your filing deadline triggers an automatic penalty if you owe money, plus daily-compounding interest on any unpaid balance.
The late-filing penalty is 1% of the outstanding balance, plus 0.25% for each full month the return remains outstanding, up to a maximum of 12 months. On its own, that may not sound dramatic, but combined with the CRA’s prescribed interest rate of 7% compounded daily, the total cost of a late filing on even a modest balance adds up quickly. If the CRA has issued a formal demand to file and you ignore it, an additional $250 penalty applies.
A detail that catches many sole proprietors: If you are an individual with a December 31 fiscal year-end who reports business income on your personal tax return, your GST/HST return is due June 15, but any balance owing is due April 30. Interest begins accruing from April 30, not June 15. Many sole proprietors assume the filing and payment deadlines are the same and are surprised to find interest charges on a return they filed on time.
How to avoid it: Log in to CRA My Business Account to confirm your assigned filing period and deadlines. Set calendar reminders at least two weeks before each due date. And here is one of the most practical pieces of advice we give our clients: file your return on time even if you cannot pay the full balance. Filing on time eliminates the late-filing penalty, even if interest continues to accrue on the unpaid amount.
Mistake 6: Not Filing When You Have Nothing to Remit
A surprisingly common error is assuming that you do not need to file a GST/HST return if you collected no HST during the period, or if your ITCs exceed the HST collected and you are owed a refund. This is incorrect. Once you are registered for GST/HST, you must file a return for every reporting period, regardless of whether you owe money, are due a refund, or had no activity at all.
Failing to file nil returns can result in the CRA issuing a demand to file, assessing a $250 penalty for ignoring the demand, or even removing you from the GST/HST registry. If you are removed from the registry and continue to collect HST from customers, this creates additional compliance problems.
This issue comes up frequently with seasonal businesses, startups in their early stages, or businesses that have slowed down but have not formally closed their GST/HST account.
Mistake 7: Spending Collected HST Instead of Setting It Aside
This is not a technical filing error, but it is one of the most damaging cash flow mistakes we see among small businesses. The HST you collect from customers is not your money, it is held in trust for the CRA. If you deposit it into your operating account and spend it, you may not have the funds to remit when your filing deadline arrives.
For an Ontario business collecting 13% HST on $500,000 in annual revenue, that is $65,000 in HST collected over the year before netting out ITCs. If your ITCs typically offset about half of that amount, you are looking at roughly $32,500 owing to the CRA. If that money has already been spent on payroll or rent, meeting the remittance deadline becomes a serious cash flow problem, and once you miss the deadline, penalties and 7% daily-compounding interest start to accumulate.
How to avoid it: Open a separate bank account or sub-account and transfer a percentage of every deposit to cover the HST portion. This is one of the simplest cash flow disciplines a small business can adopt, and it prevents the most stressful scenario: knowing you owe the CRA money you have already spent.
Mistake 8: Stopping HST Collection Without De-Registering (or Continuing After De-Registration)
Once you are registered for GST/HST, you must continue to collect and remit it on all taxable supplies, even if your revenue drops below $30,000. The small supplier threshold only determines when registration is mandatory; it does not automatically de-register you if your revenue falls. To stop collecting HST, you must formally request cancellation of your registration from the CRA.
On the other side, some businesses stop charging HST without de-registering, assuming that because revenue has dropped they no longer need to collect. If you are still registered, the CRA expects you to collect and remit on all taxable supplies. If you do not, you may be assessed for HST that should have been collected.
How to avoid it: If your business has slowed or you no longer expect to exceed the $30,000 threshold, contact the CRA to formally request cancellation of your GST/HST registration. Do not simply stop charging HST while you remain registered.
Mistake 9: Overlooking the Quick Method of Accounting
The Quick Method is an alternative accounting method available to eligible small businesses that simplifies GST/HST remittance. To qualify, your annual taxable supplies (including HST) must generally be $400,000 or less. Instead of tracking HST collected and ITCs paid separately, you remit a reduced percentage of your HST-included revenue and keep the difference.
For service-based businesses in Ontario, the Quick Method remittance rate is 8.8% of HST-included revenue. That means on $113,000 in HST-included sales (representing $100,000 in fees plus $13,000 in HST), you would remit approximately $9,944, less a 1% credit on the first $30,000 of eligible supplies ($300), for a net remittance of approximately $9,644. Under the regular method, if your ITCs were only $1,300, you would remit $11,700. The Quick Method saves over $2,000 in this example.
Many small businesses, particularly consultants, IT professionals, and other service providers with low material costs, are eligible for the Quick Method but are not aware of it. This is a legitimate CRA-sanctioned election filed using Form GST74, not a loophole. The election must be filed before the start of the reporting period to which it applies.
The Quick Method is generally most beneficial for service businesses with relatively low expenses and therefore low ITCs. If your business has significant taxable purchases (for example, if you buy inventory for resale), the regular method may produce a better result. Your accountant can model both scenarios.
Mistake 10: Poor Reconciliation Habits
Many of the mistakes above, wrong rates, missed ITCs, late filings, trace back to a common root cause: inconsistent or incomplete bookkeeping. If your books are not reconciled regularly, your GST/HST return is essentially a guess. And guesses invite CRA scrutiny.
A CRA audit of your GST/HST account typically involves a review of your sales records, expense records, ITC claims, and the supporting invoices. If your records do not tie to your filed returns, the auditor will adjust your account, and those adjustments almost never work in the taxpayer’s favour.
How to avoid it: Reconcile your HST collected and HST paid accounts monthly, not just at filing time. Use cloud-based accounting software such as QuickBooks Online to automate much of this process. At Cassar CPA, we work with our Premier and Elite clients on monthly reconciliations specifically so that GST/HST filings are accurate and stress-free when the deadline arrives.
Bonus: Electronic Filing Is Now Mandatory for Almost All Registrants
For reporting periods beginning on or after January 1, 2024, electronic filing is mandatory for all GST/HST registrants, with the only exceptions being charities and selected listed financial institutions. The previous threshold of $1.5 million in annual taxable supplies no longer applies, the requirement now covers virtually every registered business regardless of size.
Registrants who continue to file paper returns are subject to a penalty of $100 for the first return not filed electronically, and $250 for each subsequent paper return. These penalties apply even if the return is a nil return or a credit return. The CRA waived penalties for monthly and quarterly filers who filed on paper for reporting periods beginning before April 1, 2024, but that transitional relief has ended.
Additionally, as of January 1, 2024, any remittance or payment to the CRA of $10,000 or more must be made electronically. Returns can be filed through CRA’s GST/HST NETFILE service, through My Business Account, or through certified third-party accounting software.
How Cassar CPA Can Help
GST/HST compliance is one of the most practical, day-to-day aspects of running a small business in Ontario. Getting it right means fewer CRA surprises, better cash flow management, and lower audit risk. Getting it wrong can be costly, both in penalties and in time spent resolving problems that could have been prevented.
At Cassar CPA, we handle GST/HST compliance for small businesses across the Greater Toronto Area as part of our monthly accounting services. From registration decisions and Quick Method elections to filing, remittance, and audit support, our team ensures your sales tax obligations are met accurately and on time.