Hello, I just want to make sure that HST registration is not required for party A in the following scenario:
Calling business inquiries is resulting in 2+h hold times.
A is a sole proprietor and small supplier in a consulting business.
B is a farmer, who is HST registered, makes over $30,000/yr.
A&B just started a simple partnership (C) with 50/50 ownership. It will be generating income any day now (this is a software/app business).
Guide RC 4022 states:
■ You are associated with a partnership if the total of your
share of the partnership’s profits and the share of all the
persons with whom you are associated is more than half
of the total of the partnership’s profits or would be more
than half if the partnership had profits.
Since ownership in the partnership IS 50%, not more as stated above, am I to conclude that partnership C and A is not required to register for HST untill they each separately generate over $30,000 in revenues and are no longer a small supplier? B, would continue to charge HST only on the income generated from business B?
Also, partnership C and business A are ran from the same address/physical location.
Why wouldn’t they register? By not registering wouldn’t they lose the ability to claim ITC’s?
Expenses for consulting and this app development are so low, they feel it is not worth their time at this point to bother with HST registration if not required. Extra time and accounting/bookkeeping would be more than any ITC benefit in the next year.
Shouldn’t they register and use the quick method of filing? This way they get a percentage of the HST billed. This might be worthwhile. Only one HST registration is required for the partnership C.
Without reading RC 4022, does it matter whether the partnership registers or not? Are you saying that, if A and C are associated, the combined revenues would be over $30,000 and thus A would be required to register?
So, yes, A, B and C are ‘related’ businesses because they all deal with farming but does that mean that they are ‘associated’ if the partnership (C) is owned 50/50?
If C IS associated and owned partially B (who is an HST registrant) - that would mean that the partnership C has to become an HST registrant? And would that make A associated to C and B and thus require A to register as well?
As a sole proprietor, I think you have to include all revenue from all different business ventures.
One of the my client, last year, opened up a business, and he wanted 2 GST account for retail and service, but instead of 2 different GST Account, he got the same number with 0001 and 0002 at the end, essentially, it’s the same business number.
For Sole proprietor, since the CRA business number is linked to that individual, maybe it’s more reasonable the $30,000 is from all businesses
For your information, the 0001 and 0002 accounts ARE different GST accounts.
The first nine digits identify the legal entity, which in your case provided is a sole proprietor. The next two characters indicate the program account, the letter “R” indicates that it was created under the umbrella of “Revenue Canada”, though other government departments have other letters. (Yes, the BN was created before the CCRA, the CRA, and the CBSA all came into being, so they all share the first letter “R”.) The final four digits is the program sequence number. If the sequence number is 0001, it can be assumed to be that if the sequence number isn’t provided.
Why do I know this? I was one of the three IT analysts who moved the Charities Directorate into the BN system from their older system where the Charities numbers were assigned based on the TSO where the Charity’s Head Office was located. (Lordy, that was what? 25 years ago???) I had to become familiar with the system, though I wasn’t the primary on that conversion.
LOL - I remember that!!
(And the early days of CINDAC [If I remember the name properly] where you could just type in a last and first name and access anyone’s return info…long before “Revenue Canada - Taxation” thought about audit trails…)
That’s good info to know, learned something new everyday Tim. Thanks.
My thought was on the HST question posted, even if the 0001 and 0002 are 2 different GST account that requires separate filing, but when filing the T2, all revenues will be reported together as one entity.
From the personal perspective, if a taxpayer operates multiple business ventures, with gross revenue less than $30,000 each, then each business would be considered as small supplier and exempt from GST/HST
If it is only the taxpayer and they operating multiple small business ventures, each under the $30,000, but the gross of all exceeding the $30,000, then the taxpayer has exceeded the small supplier limit and needs to be registered.
Remember, the first nine digits would be the same, therefore the individual has exceeded the small supplier.
BUT, if one venture is just the taxpayer, another is taxpayer and another person, and another is taxpayer and yet another person, then the final one is taxpayer plus the other two persons, there is a chance that not required. BUT, was this organization set up to prevent the tax? In other words, does GAAR come into play? (Or the equivalent of GAAR.)
Complex isn’t necessarily the best. And this is theory and reality could be something else.
If A and B are both sole proprietors and C is a 50/50 partnership of A and B. Then C is not associated with either A or B as neither A or B controls C. Therefore C is treated as a separate entity and is only required to register if it exceeds the registration thresholds. Provided however that A and B aren’t related by blood or marriage.
That doesn’t make them “related”. Business are “related” if they are controlled by the same person or same group or by persons who are related by blood or marriage.
Not sure how the ETA defines “associated”, but the ITA definition only affects corporations, and none of your A,B,C businesses are corporations, correct?
A does not need a registration. B has a registration and will continue to need it. C, the Partnership needs a registration if it generates over $30,000 in income.
Associated person means, for GST/HST purposes, a person that is generally associated with another person, where one controls the other. Associated persons (referred to generally as “associates”) may include:
- two or more corporations
- an individual and a corporation
- a person and a partnership or trust
- two persons, if they are associated with the same third person
You are a small supplier and do not have to register if you meet one of the following conditions:
You are a sole proprietor and the total amount of all revenues (before expenses) from your worldwide taxable supplies from all your businesses and those of your associates (if they were associated at the beginning of the particular calendar quarter), is $30,000 or less in any single calendar quarter and in the last four consecutive calendar quarters.
You are a partnership or a corporation and the total amount of all revenues (before expenses) from your worldwide taxable supplies and those of your associates (if they were associated at the beginning of the particular calendar quarter), is $30,000 or less in any single calendar quarter and in the last four consecutive calendar quarters.
You are a public service body and the total amount of all revenues (before expenses) from your worldwide taxable supplies from all of the organization’s activities and those of your associates (if they were associated at the beginning of the particular calendar quarter), is $50,000 or less in any single calendar quarter and in the last four consecutive calendar quarters. A gross revenue threshold of $250,000 also applies to charities and public institutions. For more information, see Guide RC4082, GST/HST Information for Charities.