HST Issue for Taxpayer with two businesses

Tax Topics
1

I’ve reviewed QuickBooks files for both of the taxpayer’s businesses for 2024:

  1. The main business has $50k in sales and is HST registered and collecting tax.
  2. The second business, with sales under $10k, is not collecting HST.

I haven’t encountered this situation before with a single taxpayer.

As I understand it, when a sole proprietor registers for HST, the registration applies to the individual, not to each separate business. This means that if the taxpayer is registered for HST, all business activities should generally fall under that registration.

I suspect the taxpayer may have made an error by not collecting HST on the second business, which could result in them being out of pocket for the uncollected tax.

How have others approached a situation like this or what are your thoughts?

2

Advise client they should have collected hst on biz 2… as registered is registered

2 options… either we will declare sales with hst included and send the appropriate tax to the govt

or

is it possible for them to go back to their clients and reissue invoices with hst added ?

Either way.. hst is remitted on all sales before the due date… irrespective of when client collects it ( if they went with 2nd option above)

On the plus side.. any expenses incurred for business2 .. hst can be recouped.

No other options in my mind

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3

As @rachelavryl said, there is one option and that is to remit the appropriate amount of HST. Recover it if you can but HST must be remitted.

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4

Your thinking is correct. Could be pricey, depending on how many years business 2 was in operation. While there is no limit on how far back an auditor can go to assess uncollected tax, there is a 4-year window to recover HST paid on purchases. Some real estate developers have fallen into this trap by failing to self-assess on land purchased. Done right, it’s a wash, done wrong over 4 years ago, and GOTCHA.

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5

Hii
HST registration applies to the individual, not each business separately. So even if the second business made under $10k, the taxpayer should’ve still charged HST because they’re already registered. I’d suggest reviewing the invoices and reporting the missing HST in the next return, and maybe speak to CRA if unsure how to fix it.
thank you..

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6

You are right, they should have been collecting and reporting on both businesses. They coUld get an RT0002 FOR REPORTING THE SECOND BUSINESS.

Gay Wise

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7

Perhaps the second business is an “HST exempt” supply? Technically, then, the HST return should include boxes 90 and 91, though I don’t think it’s mandatory.

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