How to Track HST as a Canadian Freelancer

What Is HST and Who Needs to Collect It?

For a complete picture of your tax obligations, see our guides on self-employed tax deductions Canada and T2125 expense tracking.

HST stands for Harmonized Sales Tax. It is the sales tax collected in Ontario, Nova Scotia, New Brunswick, Newfoundland and Labrador, and Prince Edward Island. In other provinces, businesses collect GST (federally) and in some cases PST (provincially) separately.

As a self-employed Canadian, you are required to register for HST once your taxable revenue exceeds $30,000 in a single calendar quarter or across four consecutive calendar quarters. Until you cross that threshold, you are a small supplier and do not need to collect HST.

Once registered, you must add HST to your invoices, collect it from clients, and remit the net amount to CRA.

The $30,000 HST Registration Threshold

CRA uses two tests to determine when you must register:

Test 1 - Single quarter: If your taxable revenue in any single calendar quarter exceeds $30,000, you must register within 29 days of the day you exceeded the threshold.

Test 2 - Four consecutive quarters: If your taxable revenue over any four consecutive calendar quarters exceeds $30,000, you must register within 29 days of the end of the quarter in which you exceeded the threshold.

Important exception: Taxi and rideshare drivers must register for HST from their very first fare, regardless of revenue.

Once registered, you stay registered even if your revenue drops below $30,000 in subsequent years, unless you formally deregister.

HST Rates by Province

The HST rate depends on where your client is located, not where you are located.

| Province | HST Rate |

|----------|----------|

| Ontario | 13% |

| Nova Scotia | 15% |

| New Brunswick | 15% |

| Newfoundland and Labrador | 15% |

| Prince Edward Island | 15% |

In provinces without HST, you charge GST at 5%. Quebec has its own provincial tax system (QST) in addition to GST.

Most Canadian freelancers work primarily with Ontario clients and charge 13% HST.

How HST Works: Collected Minus Paid

The key concept to understand is that HST is not your money. When you charge a client $1,000 plus 13% HST, you collect $130 on behalf of CRA. You hold it until your filing deadline and then remit it.

But you also pay HST on your own business purchases. The HST you pay on business expenses is called an Input Tax Credit (ITC). You can claim these ITCs back against the HST you owe.

The formula:

HST owing = HST collected on sales - ITCs (HST paid on business expenses)

Example:

You collected $10,000 in HST on invoices this year. You paid $800 in HST on business expenses (software, office supplies, phone). Your net HST owing is $9,200.

This is why tracking both sides matters - every dollar of HST you pay on business expenses reduces what you owe CRA.

What You Need to Track

HST Collected

Every time you issue an invoice, record:

• Invoice amount before HST
• HST amount charged
• Total invoice amount
• Which province the client is in (determines the rate)
• Date of invoice
• Whether it has been paid

HST Paid (Input Tax Credits)

Every time you pay a business expense, record:

• Expense amount before HST
• HST amount paid
• Date of purchase
• Vendor
• Business purpose
• CRA expense category

You can only claim ITCs on expenses that are for business use. If an expense is partly personal, you can only claim the business portion of the HST.

What Qualifies as an Input Tax Credit

You can claim ITCs on most business expenses including:

• Software and subscriptions used for business
• Office supplies
• Professional fees (accountant, lawyer)
• Business phone and internet (business portion)
• Advertising and marketing
• Equipment and tools used for business
• Vehicle fuel and maintenance (business portion)

You cannot claim ITCs on:

• Personal expenses
• Meals and entertainment above the 50 percent business limit
• Life insurance premiums
• Medical expenses

HST Filing Periods

CRA assigns you a filing period when you register. Most freelancers are assigned an annual filing period, meaning you file once per year. Higher revenue businesses may be assigned quarterly or monthly filing periods.

Annual filers: File by June 15 of the following year (but any HST owing is due April 30).

Quarterly filers: File within one month of the end of each quarter.

Monthly filers: File within one month of the end of each month.

Even if you are an annual filer, if you expect to owe more than $3,000 in HST, CRA may require quarterly instalments.

The Quick Method of Accounting for HST

CRA offers a simplified filing option called the Quick Method for small businesses with annual taxable revenues under $400,000. Instead of tracking every ITC individually, you remit a fixed percentage of your gross sales including HST.

For service businesses like freelancers:

• You remit 8.8% on sales made in provinces with 13% HST (Ontario)
• You remit 10.4% on sales made in provinces with 15% HST

The Quick Method is simpler but may result in paying more or less than the regular method depending on how many ITCs you have. If you have significant business expenses with HST, the regular method is usually better because you get to claim all your ITCs.

Talk to your accountant to determine which method is better for your situation.

How to Track HST Practically

Separate Your HST From the Start

When you receive payment from a client, mentally separate the HST portion from your revenue. The HST belongs to CRA, not to you. Some freelancers keep HST in a separate savings account so it does not get spent accidentally.

Record Every Invoice Correctly

When you create an invoice, record the net amount and the HST separately. Do not record the gross amount as revenue - your revenue is the amount before HST.

Record HST on Every Expense Receipt

When you pay a business expense, record the HST amount separately from the expense amount. This is your ITC. Keep the receipt - CRA requires proof of the HST paid.

Reconcile Regularly

At least quarterly, total up your HST collected and your ITCs and calculate what you expect to owe. This prevents surprises at filing time and helps you set aside the right amount.

HST and the T2125

HST does not appear on your T2125 directly. Your T2125 reports income and expenses on a net basis (excluding HST). You report HST separately on your GST/HST return.

This means:

• Your T2125 income is your revenue before HST
• Your T2125 expenses are the amounts before HST
• You report and remit HST on a separate GST/HST return

Getting this right requires tracking HST completely separately from your income and expenses.

Frequently Asked Questions

When do I have to register for HST in Canada?

You must register for HST when your taxable revenue exceeds $30,000 in a single calendar quarter or across four consecutive calendar quarters. You have 29 days from crossing the threshold to register. Rideshare and taxi drivers must register from their first fare regardless of revenue.

What is an Input Tax Credit?

An Input Tax Credit (ITC) is the HST you paid on business expenses. When you file your HST return, you subtract your ITCs from the HST you collected to calculate your net HST owing. Tracking ITCs reduces the amount you remit to CRA.

Do I charge HST on all my invoices?

Once registered, you must charge HST on all taxable supplies to clients in Canada. The rate depends on the province where your client is located. Some services are exempt or zero-rated, such as certain medical and educational services.

What happens if I do not register for HST when required?

CRA can assess you for the HST you should have collected, plus interest and penalties. Failing to register when required is treated as if you collected HST but did not remit it. Register as soon as you cross the threshold.

Can I register for HST voluntarily before reaching $30,000?

Yes. Voluntary registration allows you to claim ITCs on business expenses from the date of registration. This can be beneficial if you have significant startup expenses with HST. The downside is you must then collect and remit HST on all your sales.

How do I file my HST return?

You file your HST return through CRA My Business Account online, through certified tax software, or by mailing a paper return. Most freelancers file online through My Business Account. Your return is due based on your assigned filing period.

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