GST HST for web designers Canada: a clear guide

What to take away

Every Canadian web designer who sells taxable services must know the GST/HST rules. The Canada Revenue Agency (CRA) administers the tax under the Excise Tax Act. Web design work is a taxable supply, so once you are registered, nearly every invoice you issue to a Canadian client attracts GST or harmonized sales tax.

Who must register and when

The CRA uses a small supplier threshold. You are a small supplier, and not required to register, while the revenue from your worldwide taxable supplies (including zero-rated supplies) from all your businesses, and those of your associates, does not exceed $30,000 in a single calendar quarter or over four consecutive calendar quarters. Once you exceed that amount, you must register. The CRA explains the requirement on its page about when to register and charge.

Follow these steps: add your taxable revenue from all businesses, first for the current calendar quarter on its own, then for the previous four (or fewer) consecutive calendar quarters. If either total exceeds $30,000, you can no longer call yourself a small supplier, and the test you failed decides when that happens.

If you exceed $30,000 in a single calendar quarter, you stop being a small supplier with the supply that took you over. If you exceed it over four consecutive quarters but not in a single quarter, you stop being a small supplier at the end of the month following the quarter in which you crossed the line, and your effective date of registration is no later than the day of your first supply after that. In both cases you have to register within 29 days of your effective date of registration. File your GST/HST return for your assigned reporting period, even if you collected no tax that period.

In the single-quarter case, you must charge tax on the supply that made you cross the threshold. For example, if one large project pushes your sales for the quarter past $30,000, you collect GST/HST on that invoice and on all later taxable sales. Registering is done through CRA's Business Registration Online or by phone. After registration, you receive a GST/HST account number.

What a compliant invoice must show

The CRA does not require one fixed invoice layout, but a compliant disclosure must contain specific elements. Use this checklist before sending any invoice that includes GST/HST:

If you sell to a client who is GST/HST registered, your invoice lets them claim an input tax credit. Missing the account number or tax amount can delay their claim and prompt questions from the CRA.

Filing your return and the deadlines

Your reporting period, monthly, quarterly or annual, is assigned when you register, and the due date follows from it (the deadlines are set out in the next section). If you are eligible to file on paper, the personalized return you receive (Form GST34-2) shows the due date at the top. For reporting periods that begin on or after January 1, 2024, most GST/HST registrants are required to file electronically, and there are penalties for not doing so.

You still have to file a return for a period with no business transactions. Skipping it can bring a failure-to-file notice and a failure-to-file penalty.

Records to keep

The Excise Tax Act requires records that support the tax you charge and claim. Keep copies of all invoices you issue, receipts for business purchases, and bank statements. Keep GST/HST account documents, including notices from the CRA. These records must be kept for six years from the end of the year to which they relate.

Keep the contract for each project as part of your tax records. A web design maintenance contract also belongs in the same file, because it shows the scope of taxable services. You do not need to send records with each return, but you must have them ready if the CRA asks.

What happens if you do not

The CRA's GST/HST reporting requirements and deadlines set the dates that matter here: if your reporting period is monthly or quarterly, your filing and payment deadline is 1 month after the end of the reporting period, and for most businesses that file annually it is 3 months after the fiscal year-end. The CRA can charge penalties and interest on returns or amounts it has not received by the due date.

If you fail to register once you pass the threshold, the CRA can assess the tax you should have collected. You still owe that amount even though you did not charge it to the client. Interest compounds daily on late amounts. A penalty applies to any return you file late unless there is a nil amount owing or the CRA owes you a refund on that return.

Without proper records, the CRA can estimate your tax liability. That estimate may exceed your actual amount.

A disciplined record system, including solid web design agency time tracking, cuts errors. The CRA can audit your business. An audit usually reviews the last four years of returns, but can go further if it suspects misrepresentation.

Where the rules differ by province or territory

The rate you charge depends on the client's location. The CRA calls this the place-of-supply rules: a supply of a service is generally made in the province where you obtain the client's home or business address in the ordinary course of business. For most web design services, that means the client's province or territory. Keep this table handy:

Quebec and British Columbia have separate provincial sales tax rules for some digital services. Most small web design studios still need to collect only GST/HST unless their sales into those provinces pass a separate threshold.

If your own business is physically located in Quebec, the authority changes too: in Quebec, Revenu Québec generally administers the GST/HST, and you file your returns with Revenu Québec using its forms. The Quebec Sales Tax (QST) is also handled by Revenu Québec, whose publication IN-203-V covers both taxes.

If you are still deciding how to structure your business, the guide on incorporate web design business sets out federal and provincial factors.

Common questions