Sales and Use Tax

A GST/HST return in Canada and a Sales & Use Tax return in the U.S. are regular filings businesses use to report and remit indirect taxes collected from customers.

In Canada, businesses registered for the Goods and Services Tax (GST) or Harmonized Sales Tax (HST) must file a GST/HST return monthly, quarterly, or annually. GST is 5% federally, while HST ranges from 13% to 15%, depending on the province. Businesses report the tax collected on sales and claim input tax credits (ITCs) for GST/HST paid on expenses. The net amount is either remitted or refunded.

In the U.S., Sales & Use Tax is governed at the state and local level, with rates ranging from 4% to over 10%, depending on jurisdiction. Businesses file returns – often monthly or quarterly – reporting sales tax collected and any use tax owed on out-of-state purchases not taxed at the point of sale.

These returns ensure governments receive the indirect taxes businesses collect on their behalf. Failure to file can result in penalties, interest, or audits.

Filing a GST/HST return in Canada involves reporting how much Goods and Services Tax (GST) or Harmonized Sales Tax (HST) you collected and paid out (input tax credits) during a reporting period. Here’s a breakdown of how businesses in Canada file their GST/HST returns:

• Register: If your business earns over $30,000 annually, you are required to register for a GST/HST account with the Canada Revenue Agency (CRA).
• Collect tax: Ensure you charge the correct GST (5%) or the applicable HST rate (ranging from 13% to 15% depending on the province) on all taxable goods and services you sell.
• File returns: The frequency of your filing (monthly, quarterly, or annually) depends on your business’s reporting period. You can file your GST/HST return using the CRA’s secure online services, such as NETFILE or EFILE through certified tax software.
• Remit payment: Pay the collected GST/HST to the CRA by the due date for your reporting period. Doing so will help you avoid potential interest charges and penalties for late payments.

GST/HST Tax Tip: Always file your return on time (even if you owe nothing), keep detailed records for at least six years, and remember that input tax credits (ITCs) can’t be claimed on exempt sales.

In the U.S., sales and use tax is handled at the state level, so the process varies. Generally, businesses need to:

• Register with the state’s tax authority.
• Collect sales tax on taxable goods and services sold within the state.
• Track sales and purchases.
• Complete the state’s sales and use tax return, often available online through the state’s Department of Revenue website.
• File the return by the state’s deadline (which varies by state and filing frequency).
• Pay any tax owed. Some states allow online filing and payment (e.g., CDTFA for California, MyTax Illinois, etc.)

Sales Tax Tip: Always file on time – even if no tax is due, maintain exemption documentation, and track untaxed purchases for use tax liability to stay compliant with state rules.

The deadline for filing a GST/HST return in Canada depends on the business’s reporting period, which is usually based on their annual revenue:

• Annual: Three months after the fiscal year-end. Typically for small businesses (≤ $1.5 million in revenues). For example: If your year ends December 31, your return is due by March 31
• Quarterly: For businesses with revenues between $1.5 million and $6 million. It is due one month after the end of each quarter (e.g., for the quarter ending March 31, the due date is April 30).
• Monthly: The due date is one month after the end of the month. Usually required for businesses with > $6 million in annual revenues. For example: May return due by June 30

GST/HST Tax Tip: If the due date falls on a weekend or holiday, it typically moves to the next business day. You must file your return even if no tax is owed, as both the return and payment are due on the same date, and late filing can lead to penalties and interest.

The Sales & Use Tax return due date in the U.S. depends entirely on the state you’re filing in and the filing frequency assigned to your business – monthly, quarterly, or annually. Your frequency is usually determined by the volume of taxable sales you report.

For monthly filers, the return is generally due by the 20th of the following month. For example, sales made in April are typically reported by May 20. However, this can vary: in California, monthly returns are due on the last day of the following month, while in Texas, the due date remains the 20th, but businesses that pay early may qualify for a 1.25% prepayment discount.

If you file on a quarterly basis, returns are usually due by the 20th or end of the month following the close of each quarter. For instance, Q1 (January through March) returns are often due in April, commonly by the 20th. Some states may offer different dates or grace periods, so it’s essential to check with your state’s department of revenue.

For annual filers, the due date generally falls in January of the following year, typically between January 20 and January 31. This applies to businesses with minimal tax liability, but states vary significantly, and some may allow different annual filing deadlines.

Sales Tax Tip: Sales and use tax return deadlines are state-specific and frequency-based. While the 20th is a common due date, especially for monthly and quarterly filers, always consult your state tax agency to confirm the exact deadline and avoid late filing penalties or interest.

In the United States: Sales & Use Tax Returns

Sales tax is a state-level obligation. Businesses registered in a state must collect sales tax on taxable sales made within that jurisdiction and remit it to the state’s department of revenue.

In addition to sales tax, businesses may also be liable for use tax, which applies when the business purchases goods from out-of-state vendors without paying sales tax and uses them within the state. In such cases, the business must self-assess and report the use tax on the return.

To complete a return, businesses must report:

• Total gross sales
• Exempt or non-taxable sales
• Taxable sales
• Sales tax collected
• Use tax owed (if any)

The filing frequency (monthly, quarterly, annually) depends on the size of the business and state-specific rules. Deadlines and forms vary by state.

In Canada: GST/HST Returns

Businesses that are registered for GST (Goods and Services Tax) or HST (Harmonized Sales Tax) must charge these taxes on taxable supplies of goods and services. The tax collected is not kept by the business, it’s held in trust and must be remitted to the Canada Revenue Agency (CRA) through periodic returns.

To file a GST/HST return, a business reports:

• The total tax collected from customers during the reporting period
• The input tax credits (ITCs) it is eligible to claim (i.e., GST/HST paid on business-related purchases and expenses)
• The net tax (GST/HST collected minus ITCs)

As in in the US, a GST/HST return can be filed monthly, quarterly, or annually, depending on revenue. If the result is a positive balance, the business pays the difference to CRA. If the ITCs exceed the collected tax, the business can claim a refund.

Sales & Use Tax Refunds (U.S.)

Sales and use tax refunds are generally available when:

• A business over-collected or overpaid sales tax to a state
• Tax was charged on an exempt transaction (e.g., sale to a nonprofit, resale purchase)
• A buyer pays use tax on an item that was later returned or destroyed
• A business pays tax on goods purchased for resale (and didn’t present a resale certificate)

To get a refund, businesses must usually file a claim with the state tax authority, provide supporting documentation (invoices, exemption certificates), and meet time limits (often 2–4 years). Some states allow buyers to apply directly, while others require going through the seller.

GST/HST Refunds (Canada)

Businesses registered for GST/HST may receive a refund (or credit) if their input tax credits (ITCs) exceed the GST/HST they collected in a reporting period. This often happens when:

• The business makes zero-rated exports or supplies (e.g., exports, medical devices)
• The business incurs high start-up or capital costs with GST/HST paid on purchases but limited sales
• The business is in a net refund position due to temporary losses or excess input tax credits

Also, individuals or organizations (such as charities or public institutions) may claim GST/HST rebates if:

• They paid tax in error
• They qualify for public service body rebates
• They are non-residents entitled to visitor rebates (in rare, specific cases)

Pro Tax Tip: Detailed records and timely claims are essential to successfully recover overpaid taxes.

A GST/HST or Sales & Use Tax return Notice of Assessment is an official statement issued by a tax authority after your return is reviewed. It outlines the results of their assessment, confirming whether you owe additional tax, are entitled to a refund, or if any adjustments, penalties, or interest have been applied.

In Canada, the CRA issues a GST/HST Notice of Assessment after reviewing your return. It shows the net tax owing or refund, includes any changes they’ve made (such as denied input tax credits), and provides payment or appeal instructions. Even if you filed accurately, you may still receive one confirming the return was accepted as filed. In the U.S., a state’s Department of Revenue issues a Sales & Use Tax Notice of Assessment if it finds errors, missing payments, or underreporting – often following a return review, non-filing, or audit. It includes the assessed tax, penalties, interest, and how to dispute or appeal the notice. Prompt action is key to avoiding enforcement.

Navigating Sales & Use Tax and GST/HST rules can be overwhelming, especially when mistakes lead to tax audits, penalties, or lost savings. That’s where an experienced tax attorney becomes invaluable – not just for filing, but for protecting and optimizing your business. Here’s why:

1. Accurate and Compliant Filing: Tax lawyers ensure your returns are prepared correctly, applying the right rates, classifications, and exemptions.
2. Audit Defense and Dispute Resolution: If you’re audited or receive a Notice of Assessment, a tax attorney can represent you, respond to inquiries, and appeal decisions if needed.
3. Expertise in Complex Transactions: They can handle industry-specific issues, such as intercompany sales, drop shipping, digital goods, or cross-border transactions.
4. Strategic Tax Planning: An experienced tax lawyer can advise on how to structure your operations to minimize exposure and take advantage of legitimate tax savings.
5. Multi-Jurisdictional Compliance: Especially helpful if your business operates in multiple provinces or states, ensuring you stay compliant across borders.
6. Maximizing Refunds and Credits: Tax Lawyers can help claim input tax credits (Canada) or ensure resale exemptions are properly applied (U.S.), avoiding missed savings.
7. Legal Protection and Confidentiality: Communications with a tax attorney are protected by solicitor-client privilege, which is not the case with tax accountants.

Engaging a tax lawyer adds a layer of legal insight and protection that goes beyond basic tax filing.

At TaxLawyer.com, we connect you with experienced tax professionals who understand the complexities of both Canadian GST/HST and U.S. Sales & Use Tax systems. Whether you operate locally or across borders, our network of skilled tax lawyers is ready to help you file accurately, stay compliant, and resolve any tax issues that arise.

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