HST Reporting Options for Non-Profit Organizations
Sarah Tremblay, CPA, CA
It is important that directors of non-profit organizations (NPO) understand their HST filing requirements. It is also important, and potentially advantageous, for them to be aware of the different HST reporting options available. An NPO may elect to use one of the alternate, often simpler, methods of accounting for, and reporting, HST if they meet certain criteria. Depending on the organization and the composition of its expenses, an organization could save time and money by selecting one reporting method over another.
An NPO is required to register for HST if its revenue from taxable supplies exceeds $50,000 in a calendar quarter. HST registrants are required to charge and collect HST on taxable supplies. The applicable HST rate varies by province. In Ontario, for example, it is 13%. An HST-registered NPO is eligible to claim input tax credits (ITCs) for HST paid on expenses related to its commercial activities.
Most HST-registered NPOs use the “regular” method of reporting HST. Under this method, the organization must record the amount of HST collected/collectable or paid/payable for each commercial transaction. The net amount is paid to, or claimed as a refund from, the Canada Revenue Agency (CRA) on a HST return.
Qualifying NPOs, those for which government funding makes up at least 40% of total revenue, can elect to use the special quick method of accounting for HST. Under this method, the tax balance due to the CRA is calculated as revenue from taxable supplies multiplied by the applicable special quick method rate. The applicable rate(s) will depend on where the organization has a permanent establishment and where the taxable goods or services are sold or provided.
For an NPO that has a permanent establishment and provides services in Ontario, the special quick method rate is 9.9%. There is no need to record the actual amount of HST paid on each commercial transaction, which may simplify the reporting process and reduce the administrative burden to the organization. ITCs can still be claimed on certain purchases, such as real property, capital assets, and related improvements.
Even if an NPO does not qualify to use the special quick method, they may elect to use the quick method if their annual revenue from taxable supplies is less than $400,000. The quick method is very similar to the special quick method, except the organization is entitled to a 1% credit on the first $30,000 of sales, and the rates are different. The quick method rate for organizations that provide services in Ontario is 8.8%.
It should be noted that a separate quick method is applicable for registered charities, even though a registered charity is also a NPO and might, in fact, have 40% or more of its funding from a branch of government.
It’s always recommended you speak with your advisor any time you’re dealing with a tax reporting issue. To get in touch with one of our experts, visit www.GGFL.ca and follow us on Twitter @GGFLCA.