Collected GST/QST but Didn’t Remit It? Urgent Steps to Take Before It Becomes Serious

Collected GST/QST but haven’t remitted it yet? This scenario is more common than many business owners admit – and it’s one of the most dangerous cash flow shortcuts a company can take. Using tax money as working capital may feel like a temporary fix, but both the Canada Revenue Agency (CRA) and Revenu Québec treat unremitted sales taxes as a serious offense. In fact, once GST or QST is collected (or deemed collectible), it legally belongs to the government, not your business. Failing to remit these funds on time can trigger steep penalties, personal liability for directors, aggressive audits, and even criminal charges. This professional guide – in the tone of a Big-4 advisory whitepaper – explains the legal framework, warns what can happen if you fall behind, and outlines urgent steps (the Mackisen Strategy) to get ahead of the problem before it escalates. We’ll also answer common questions (Will authorities forgive penalties? Am I personally on the hook? Should I come forward voluntarily?) and explain why Mackisen CPA is uniquely qualified to help with full audit defence and director protection.

Legal Framework: GST/QST Are Trust Funds – Collected Taxes Must Be Remitted

Once your business charges Goods and Services Tax (GST) or Quebec Sales Tax (QST) on sales, you are legally obligated to remit those taxes to the government by the due date. Federal law (the Excise Tax Act) and Quebec law (the Tax Administration Act, sometimes called Loi sur l’administration fiscale or LAF) explicitly state that any GST/QST you collect (or should have collected) from customers is held in trust for the Crown. In other words, that money is never truly yours – you’re holding it on behalf of the government. If you invoice a client $100 + GST, you owe the government $5 GST even if the client hasn’t paid yet (i.e. the tax is “collected or collectible”). The same applies for QST in Quebec.

Importantly, directors and officers of a corporation have a duty to make sure these trust funds are remitted. Under Excise Tax Act section 323(1) and Tax Administration Act (Quebec) section 24.0.1, tax authorities can personally assess the directors for any unremitted GST/HST or QST, plus related interest and penalties. In effect, directors become jointly and severally liable with the company for the unpaid tax. This obligation isn’t limited to large public companies – even if you’re a director of a small business in Montreal, if you sign off on finances or have influence over payments, you could be personally on the hook.

Why such strict rules? Lawmakers consider sales taxes and payroll withholdings as trust funds – money collected from the public for government programs. If a business diverts those funds to pay rent or suppliers, it’s essentially using the government’s money to finance its operations. To deter this, the law gives CRA and Revenu Québec strong powers: they treat unremitted GST/QST as a Crown debt with priority, and they impose personal liability on directors who fail to ensure remittance Even if a corporation is dissolved or goes bankrupt, tax authorities can pursue directors personally for the amounts owed. There is a limited due diligence defense: a director won’t be liable if they can prove they exercised the care, diligence, and skill of a reasonably prudent person to prevent the failure to remit. We will discuss what that means in practice, but the bar is high.

Directors Beware: Cases Confirm Personal Liability (Buckingham, McKinnon, Quebec Precedents)

Directors often assume that corporate status shields their personal assets. In reality, courts in Canada have repeatedly held directors personally liable for unremitted GST/HST and QST. A landmark case is Canada v. Buckingham (2011 FCA 142). In Buckingham, the Federal Court of Appeal made clear that a director’s foremost duty is to prevent tax remittances from being missed, not just to respond after the fact. Mr. Buckingham was a director whose company fell into financial trouble; he kept the business afloat by using cash that should have paid GST and payroll deductions. He argued he tried his best to save the company. The court still found him personally liable for all unremitted taxes. Why? Because good intentions are no excuse if you finance your company with Crown monies – the exact situation the law’s personal liability provisions are designed to prevent. The court set an objective standard for the due diligence defense: it’s not about your personal circumstances or honest belief; it’s about what a reasonable, prudent person would have done. A prudent director would never allow GST/QST to go unpaid if it could be helped – even if that means cutting other costs or shutting down the business to stop the bleeding.

Another instructive case is McKinnon v. The Queen. In McKinnon (2000 FCA 338), the Federal Court of Appeal acknowledged that in rare circumstances a director might avoid liability – for example, if a secured creditor or a bankruptcy trustee seizes control of the company’s accounts, leaving the director powerless to remit. Essentially, if someone truly outside the director’s control legally prevents the taxes from being paid, the director might not be at fault. However, this is the exception, not the rule. Unless you as a director are completely stripped of authority, you remain responsible for ensuring the government gets its due. In the vast majority of cases, arguing “I had other bills to pay” or “I hoped to make it up later” will not fly. Canadian courts consistently reinforce that directors cannot use government withholding funds as a float for a failing business.

Quebec courts mirror these principles under provincial law. For example, in Dionne v. Revenu Québec (2018 QCCQ 1123), a Quebec court ordered a director’s personal home seized and sold after the company repeatedly failed to remit QST. In Laroche v. Canada (2019 FCA 205), a director was held personally liable for $145,000 in misused GST trust funds. Directors have tried all sorts of defenses: claiming they “left it to the accountant,” claiming they resigned, claiming ignorance. These generally fail. In Lavoie v. Canada (2020 TCC 76), a director who argued that he thought his accountants were handling the filings was still found personally liable – signing blindly does not absolve a director. And in Angers v. Canada (2016 FCA 187), the court confirmed that resigning as a director doesn’t protect you from liability for the period when you were in charge. In short, personal liability for directors is real and enforceable. The legal precedents send a clear message: if you’re a director and GST/QST isn’t remitted, expect the government to knock on your door for the balance.

Why CRA and Revenu Québec Crack Down on Unremitted GST/QST

Unremitted sales taxes raise red flags for tax authorities. From the government’s perspective, a business that collects GST/QST and doesn’t send it in is effectively misappropriating funds that belong to the public. CRA and Revenu Québec therefore monitor these accounts aggressively and prioritize collection action on them. Here’s why and how:

• Trust Funds & Public Impact: GST and QST are indirect taxes paid by consumers. When a company fails to remit, it’s not just a private debt – it’s money taken from customers that never reached government coffers. This is viewed as particularly egregious non-compliance, akin to breaching a public trust. The CRA’s collections departments (sometimes called Trust Accounts programs) pay close attention to even small businesses’ GST/QST remittances. Revenu Québec, whose mission is “maintenir l’équité fiscale” (maintain tax fairness), likewise considers non-remittance as cheating all taxpayers.

• Audit Triggers: Unremitted GST/QST often triggers audits or reviews. If you file GST/QST returns that show a balance owing and you don’t pay, the system is alerted. Repeated late GST filings, or continually reporting net tax but not remitting, will prompt closer scrutiny. Also, the agencies cross-check filings: if your GST returns show significantly more sales than your income tax returns report, or if you claimed large GST refunds while reporting modest income, expect questions. A blatant mismatch between sales on your GST/QST filings and revenues on your corporate tax return is a classic audit trigger. The CRA and Revenu Québec share data, especially in Quebec where businesses file both federal GST and provincial QST – discrepancies stick out like a sore thumb.

• Risk Flags: Both authorities use risk scoring systems. Patterns that can flag a file for audit include: frequent late GST/QST returns, prior non-compliance history, significant year-over-year changes in GST payable or refunds, and industries known for using cash flow from taxes (construction, hospitality, retail, etc.). If you’ve received warning letters or reminders about unremitted GST/QST and still don’t act, enforcement divisions will escalate the case quickly. In Quebec, for example, Revenu Québec may issue an estimated assessment for unfiled periods – basically billing you an arbitrary amount – which often carries heavy built-in penalties

The Canada Revenue Agency’s headquarters in Ottawa (Connaught Building). Both CRA and Revenu Québec aggressively pursue unremitted GST/QST as a top enforcement priority.

• Swift Collections and Freezes: One reason to never ignore this issue: collections action can kick in fast. Unlike income tax (where audits can take time), unremitted GST/QST is low-hanging fruit – the amounts are often self-reported on your returns, so if not paid, the debt is clear. The CRA can serve a requirement to pay on your bank (freezing your business account) or garnishee receivables without a court order. Revenu Québec can do the same, and even freeze personal assets of directors if they assess you personally. Many clients are shocked to find their corporate account or even personal savings suddenly locked down over a “tax problem” they thought they could delay. But to CRA and Revenu Québec, an unpaid GST/QST remittance is an urgent liability, not something they’ll wait patiently for.

• Signals of Financial Trouble: Persistently unremitted GST/QST is also seen as a strong signal of financial distress or possible tax evasion. Auditors know that when a business starts using GST/QST funds to cover operating costs, it may also be cutting other corners (like underreporting income or misclassifying expenses). Thus, one compliance breach invites a deeper look at all your tax affairs. In worst cases, if the pattern suggests intentional fraud (for example, collecting GST from customers while never intending to remit), investigators can pursue tax evasion charges. Simply put, failing to remit is one of the fastest ways to get on the radar of tax authorities – and not in a good way.

Penalties, Interest, and Worse: What’s at Stake if You Don’t Remit

Falling behind on GST/QST payments can get very expensive, very quickly. Here’s what you’re facing:

• Late Remittance Penalties: Both CRA and Revenu Québec impose financial penalties for not remitting on time. Federally, the Excise Tax Act provides a penalty of 6% per year (0.5% per month) on the overdue GST/HST amount. This is on top of the interest. In Quebec, late QST remittances incur similar percentage penalties under the Taxation Act (for example, Revenu Québec may charge roughly 7% on late tax debts, mirroring federal structure). While 6% or 7% might not sound huge, remember this is in addition to interest and can compound if multiple periods are missed or if the government had to estimate your taxes due. There are also flat penalties if you fail to file a return after being demanded – e.g. a $250 penalty per required return if you ignore a formal notice to filecanada.ca. The longer you delay, the more penalties pile up.

• Daily Compounding Interest: Interest on unpaid GST/QST accrues daily from the day it was due until full payment is received. The rates are not trivial – they fluctuate quarterly and are pegged a few points above the Bank of Canada rate. As of 2025, CRA’s interest on overdue GST is around 8%–9% per annum, compounded daily (Revenu Québec’s interest rates are similar). This means each day your tax is outstanding, the interest meter is running. After a year of non-payment, expect a sizable interest bill on top of the tax itself and penalties.

• Penalties for False Reporting or Evasion: If the authorities suspect that you willfully under-reported GST/QST (for example, you didn’t register for GST when you should have, or you hid taxable sales), they can impose gross negligence penalties – often 25% or even 50% of the understated tax. Those are punitive and meant to hurt. In egregious cases, if you collected tax and falsified returns to cover it up, that crosses into tax fraud territory. The Excise Tax Act makes it an offence to willfully evade or fail to remit taxes. On summary conviction, this can carry a fine of up to $1,000 plus 20% of the tax and even up to 6 months in prison. Revenu Québec likewise can pursue fines or charges under provincial tax statutes for tax evasion, which have their own stiff penalties and potential jail terms. To be clear, small businesses who are merely late rarely see criminal prosecution – the government’s first goal is to collect the money, not put owners in jail. But if, for example, a business collects $500,000 of GST over several years and blatantly never remits a cent, or issues fake invoices to cover it up, the Crown may well push for criminal charges. The mere possibility underscores how serious unremitted GST/QST is in the eyes of the law.

• Director Liability & Personal Risk: As covered, if you’re a director, the personal financial risk cannot be overstated. Once CRA or Revenu Québec concludes the company isn’t going to pay (say the company has no funds, is insolvent, or has been uncooperative), they can assess you personally. That assessment will include the full amount of unremitted tax plus all accrued interest and penalties. They can then pursue collection against you just like a personal tax debt. This means liens on your house, garnishing your personal bank account or wages, seizing personal assets, etc. We saw in Dionne’s case a house lien and seizure. It doesn’t matter if you didn’t directly pocket the tax money – as a director you’re deemed responsible for the loss to the Crown. The only “out” is proving a due diligence defense (i.e. that you truly did everything a prudent person would have to prevent the non-remittance). Successfully asserting due diligence is difficult (as Buckingham showed), and even if you eventually win in court, you would endure the stress and cost of litigation in the meantime. Practically, most directors in this situation end up negotiating a payment and footing the bill to avoid legal action. Remember, director liability extends up to 2 years after you leave your role – resigning won’t immediately protect you if the non-remittance happened on your watch

• Corporate Consequences: Even aside from personal liability, the business itself will face aggressive collection if GST/QST remains unpaid. CRA can freeze corporate assets or have the sheriff seize and sell property. Revenu Québec can revoke your company’s tax registration, which effectively can shut down your operations (you legally can’t continue charging tax if they cancel your GST/QST account, and operating without charging tax when you should is illegal). The business’s tax refunds or credits from other programs will be offset against the debt. If the amounts are large, the corporation could be pushed into bankruptcy or receivership by the Crown’s actions. Future dealings with tax authorities will be under a microscope – for instance, any GST refunds you try to claim later might be withheld or audited in detail to ensure it’s not another ploy. In sum, unremitted GST/QST debts cast a long shadow over a business’s viability.

The Mackisen Strategy: 6 Urgent Steps for Damage Control and Compliance

If you have unremitted GST/QST, time is of the essence. The longer you wait, the fewer options you have. Mackisen CPA has developed a rapid-response approach to handle these situations, combining damage control with strategic negotiation. Here is the step-by-step strategy we recommend to clients before the problem becomes unmanageable:

Step 1: Stop the Bleeding (Immediate Damage Control) – Cease using tax funds for anything else. Starting right now, segregate any GST/QST you collect going forward. For example, if you make a sale today with GST, set that tax aside in a separate account. Do not further commingle it with operating money. This prevents the hole from getting deeper. It also shows good faith – if/when you approach tax authorities, recent compliance will work in your favor. Additionally, take stock of the situation quietly: How many reporting periods are behind? How much (roughly) do you owe for each? Understanding the scope (even an estimate) is crucial for planning. Do not ignore any new correspondence from CRA or Revenu Québec. Those brown envelopes contain important notices – open them, because they often contain deadlines or impending actions. If you’ve received a final notice or demand, note its due date. At this stage, you may also want to limit communications with the tax authority until you get advice – don’t make any false statements or admissions out of panic. Simply acknowledge receipt of notices if contacted, and say you are working on a resolution. Damage control is about stabilizing the situation: no more missed filings, no more new debts, and no triggering the authorities unnecessarily while you prepare your next moves.

Step 2: Get the Filings Up to Date – Unfiled returns compound your problem. Late filing penalties stack on top of late payment penalties, and unfiled periods might lead the agency to issue arbitrary assessments (which are often higher than actual amounts). Even if you can’t pay the tax immediately, file all overdue GST/QST returns as soon as possible. Filing the returns stops the “failure to file” penalties and demonstrates proactive compliance. It also gives a clearer picture of your liability. If your bookkeeping is a mess or you’re not sure how much to report, get professional help to reconstruct the records. At Mackisen, we often perform rapid bookkeeping cleanup for clients in this situation. This can include recreating sales records from bank deposits, estimating taxes collected based on invoices, and verifying input tax credits. Clean, accurate returns are essential – if you guess or file incorrectly, it could trigger further audits down the line. It’s better to take a few extra days to ensure the numbers are right (with CPA oversight) than to file sloppy returns. Remember to include any applicable interest and penalty calculations on the returns if required (CRA forms have a section for this). By filing, you show the government that you’re taking responsibility, which can go a long way in later negotiations. (Note: If you collected QST and are late in filing, Revenu Québec’s system might automatically apply late-filing penalties once you file – but that’s still better than them estimating an even larger amount. In a case study, a client who filed all overdue returns before Revenu Québec raised an arbitrary assessment avoided thousands in penalties.) Filing now is a key part of damage control.

Step 3: Quantify the Total Liability and Plan for Payment – Once returns are filed (or at least drafted), you’ll know the total GST/QST owed plus estimated interest/penalties. This might be an eye-opening number. The next step is figuring out how you can pay or secure this amount. Evaluate your company’s finances: can the business pay it in full if given a bit of time (say 3-6 months)? Do you need to seek financing (loan, line of credit) to cover it? Are there assets that could be sold? If the business cannot realistically pay it all, assess personal finances if you’re a director – because the government certainly will. It may be wise to preemptively move some personal funds or a second mortgage if it means avoiding bigger trouble. The goal here is to enter negotiations with a proposed payment plan. For instance, you might determine: “We can pay 30% upfront and the rest over 12 months.” Having a concrete plan to present shows proactiveness. Be realistic – an overly optimistic promise that you can’t fulfill will backfire. If cash flow is truly insufficient, this is also when you consider higher-level solutions: bringing in an investor, entering a formal payment arrangement via a taxpayer relief request, or even insolvency proceedings if debts are overwhelming (though talk to a professional before considering bankruptcy; tax debts have special priority). Mackisen CPA can help analyze your finances and craft a viable payment proposal that balances your survival with what the tax authorities will accept. The key is to demonstrate willingness to pay and a credible means to do so, even if not all at once.

Step 4: Consider Voluntary Disclosure (If Eligible) – The CRA and Revenu Québec both have Voluntary Disclosure Programs (VDP) that allow taxpayers to come forward before they are under active audit or enforcement, in exchange for some relief from penalties and prosecution. If you haven’t been contacted yet about the unremitted GST/QST (no audit notice, no collection action besides perhaps automated late notices), you might qualify for the VDP. Under the CRA’s VDP, for example, if you voluntarily disclose unreported tax, you can get penalties waived and avoid criminal charges, though you’ll still pay the full tax and interest. Revenu Québec’s voluntary disclosure is similar. Using VDP can potentially save you the late-remittance penalties (e.g. that 6% per year) and any failure-to-file penalties – which, on a large balance, could be tens of thousands of dollars saved. Timing and completeness are critical: the disclosure must be truly voluntary (not after they’ve announced an audit or enforcement), and you must fully cooperate and disclose all periods with issues. This is where involving a tax professional is highly recommended – we can help submit a disclosure anonymously (as a “no-name” disclosure initially) to gauge if it will be accepted, and ensure all necessary information is included. Keep in mind that recent changes in policy might categorize a GST/QST non-remittance disclosure as high-risk, meaning you get partial relief (some penalties still apply but gross negligence penalties are waived, etc.). Even so, partial relief is better than none. Voluntary disclosure is essentially your “amnesty” window, so if you’re a good candidate, take it. For example, we assisted a Montreal retailer who had quietly not remitted QST for 2 years; through a carefully prepared voluntary disclosure, all late penalties were waived – saving the client roughly 15% of the tax owing – and they just had to pay tax plus interest. The VDP route only works before the taxman comes knocking, so this step has urgency. (If you’re already under audit or have been asked about those returns, VDP is off the table – you then move straight to negotiation.)

Step 5: Negotiate with Tax Authorities (Payment Plan & Relief) – Whether via voluntary disclosure or because the tax agency has caught on, you will eventually need to formally deal with CRA and/or Revenu Québec about the debt. It’s best not to go in alone. A seasoned CPA or tax lawyer can negotiate on your behalf, which often leads to more flexible terms. The objectives in negotiation are: (a) prevent harsh enforcement (like asset freezes), (b) set up a reasonable payment plan, and (c) where possible, reduce or waive penalties (and interest, in rare cases) through taxpayer relief provisions. When Mackisen represents a client in this situation, we typically contact the CRA/Revenue Québec officer handling the file early, to show cooperation and good faith. We present the filed returns and a proposal: e.g. “Our client can pay $X upfront and $Y monthly over the next year to clear the balance.” We also explain any special circumstances – perhaps the non-remittance was due to a one-time crisis (illness, fraud by an employee, etc.). If so, we may request cancellation of penalties under the fairness guidelines, which both agencies can consider in extraordinary situations. The CRA, for instance, can waive penalties and interest if the failure to remit was due to factors beyond your control (though they apply this sparingly). Even if they won’t cancel interest, sometimes penalties can be negotiated away if you show a proactive approach (especially through VDP, where it’s part of the deal). Payment plans are quite common – the key is to propose an amount that you can realistically pay each month. Generally, they’ll want the debt cleared within a year or two at most. We ensure the plan leaves you with enough cash flow to also stay current on new tax obligations (nothing would derail a plan faster than you defaulting because new GST also went unpaid). Get any plan in writing from the collections officer. If multiple parties are involved (e.g. CRA and Revenu Québec both are owed), negotiate with each – sometimes one will wait while you pay the other, but don’t assume. Throughout negotiation, maintaining a respectful, transparent dialogue is crucial. Our team’s familiarity with local CRA and Revenu Québec practices in Montreal helps – we know what arguments resonate. The outcome we aim for is a signed payment agreement that stops further interest from compounding excessively and halts any legal enforcement as long as you honor the payments.

Step 6: Protect the Directors (Resolution Strategies) – If you are a director of the company (or there are multiple directors), special steps should be taken to limit personal exposure. First, once a plan is in place to fix the issue, document the board’s actions. This can include passing a director’s resolution stating that the company acknowledges the debt and will make it the top priority to remit all GST/QST, and that as directors you are instituting controls to ensure this never recurs. Such internal documentation can later serve as evidence of due diligence, showing that you took your responsibilities seriously once aware of the problem. If the company is insolvent and can’t be saved, then a tough decision may be needed: consider ceasing operations or resigning as a director before more unremitted tax accumulates. Courts have noted that resigning in a timely way can cap your personal liability window (there’s a statutory 2-year look-back for director liability after resignation). However, don’t resign after the fact just to dodge liability – that doesn’t erase what’s already happened, and if anything it removes your ability to fix the problem. Another strategy: if there are multiple directors and one is more culpable for the lapse, the others should clearly record their objections once they become aware. For example, if as a director you discover the CFO hasn’t remitted GST for 3 quarters, immediately voice your dissent in writing (email or board minutes) and urge corrective action. This won’t guarantee protection, but it strengthens a due diligence defense that you personally tried to prevent the failure. Additionally, look into director liability insurance – though many D&O policies exclude tax liabilities, some specialized coverage or indemnification arrangements might help with legal costs if it comes to that. Mackisen can also advise on formal indemnity agreements between the company and directors (so the company promises to repay any director who gets stuck with the tax bill). The bottom line is to make every effort to solve the tax debt at the corporate level, and paper your efforts as a director acting responsibly. If CRA or Revenu Québec do issue a director’s liability assessment, don’t ignore it – you have the right to appeal if you believe you met the due diligence standard. Our team can help mount such a defense, citing cases like Buckingham to argue on the standard of care. But prevention is far better than fighting an assessment later. Protecting the directors means both resolving the immediate problem and building a case that you took proper action. This dual approach can sometimes even dissuade the tax authorities from jumping straight to personal assessments, if they see the company and its directors proactively fixing the issue.

Step 7: Future Audit Protection & Compliance – After you’ve addressed the immediate crisis, it’s crucial to prevent a repeat and be prepared for scrutiny. The reality is, when a business has a history of unremitted GST/QST, it may face elevated audit risk for a while. Part of the Mackisen strategy is to put safeguards in place for the future. This includes: establishing a strict remittance schedule (mark all GST/QST due dates on a calendar with reminders, well in advance), implementing a system where a portion of each sale’s revenue is automatically set aside for taxes (some clients use separate tax savings accounts), and improving bookkeeping practices so you always know your liability. We advise clients to perform monthly reconciliations: compare your sales records against GST collected, and make sure the right amount is ready to remit. Regular oversight by a CPA or bookkeeper can catch issues early (for instance, if input tax credit claims look unusually high one quarter, or if sales dipped but GST collected didn’t). Additionally, maintain a paper trail. Keep copies of all filed returns, proof of payments, and any communications with CRA/Revenu Québec. If you enter a payment plan, hold onto that agreement and evidence of each payment made. If an audit does occur, having organized records will make it go much smoother and show the auditor that, aside from the past lapse, you’re now compliant. Also consider engaging your CPA firm for full audit defense – at Mackisen, for example, our audit defence service means if the CRA or Revenu Québec initiates an audit, we handle all correspondence, reviews, and meetings on your behalf, shielding you from the stress and ensuring the audit scope doesn’t widen unnecessarily. By being prepared and demonstrating a culture of compliance, you greatly reduce the chances of facing another crisis. In short, once burned by an unremitted GST/QST issue, come back stronger: fix the weaknesses in your processes and lean on professional support to restore the government’s trust in your business.

Real Client Experiences (Anonymized)

Sometimes the best illustration is a real story. Here are two anonymized cases that show what can happen if GST/QST isn’t remitted – one ended in a harsh outcome, and the other shows how quick action can turn things around:

Case 1: Inaction Leads to a Frozen Bank Account – A Montreal marketing agency found itself owing about $50,000 in combined GST and QST after a year of struggling cash flow. The owner kept thinking next month’s sales would allow a catch-up, but that never happened. They also fell behind on filing returns, hoping to “hide” the problem. CRA sent repeated notices which were ignored. Finally, without further warning, CRA proceeded to freeze the company’s bank account and issued a requirement to the firm’s biggest client to divert payments to CRA. Revenu Québec simultaneously placed a lien on the company’s receivables. The business was crippled overnight – no access to funds and embarrassed in front of its client. The owner came to us only at this point. By then, the debt had ballooned with penalties and interest, and both agencies were prepared to hold the director personally liable. We helped negotiate a slight thaw – the bank account was partially released so the business could operate – but only after the director agreed to a personal caveat on his house as security for a payment plan. Ultimately, the director had to refinance his home to pay off the debt and get the liens removed. This painful outcome could have been avoided with earlier intervention. The lesson: ignoring the problem allowed it to become “serious” indeed – affecting personal assets and nearly destroying the company’s reputation. If you collect GST/QST and don’t remit it, the government’s reach can and will extend to both your business and personal world.

Case 2: Saved by a Last-Minute Disclosure – A family-owned wholesale distributor in Quebec went through rapid growth and in the process failed to remit about $80,000 of QST over multiple quarters. They had filed the returns, so the debt was known to Revenu Québec, but the company kept delaying payment. They received a final notice threatening legal action. At this stage, they engaged Mackisen. We immediately contacted Revenu Québec and asked if the file had been sent to enforcement yet – it hadn’t, but was about to be. We quickly assembled a Voluntary Disclosure application, even though technically the debt was already known, we framed it as disclosure of the true reasons and full extent of the issue. Meanwhile, our team worked around the clock to clean up their books (there were some minor errors in prior filings that slightly overstated the liability, which we corrected). We filed corrected returns and a disclosure package just in time. The result: Revenu Québec agreed to waive all late penalties, because the client came forward proactively and had a solid story (rapid growth strains and accounting mistakes). They allowed the company to enter a 12-month payment plan for the tax and interest, rather than enforcing immediately. No directors were assessed, and no public record of the issue was made (important for the family’s reputation). The business owner later told us this likely saved the business, as a sudden seizure of funds would have caused suppliers to cut them off. This positive outcome was only possible because the client did not wait any longer once the writing was on the wall. By treating the matter as urgent and getting professional help to engage the authorities constructively, they averted disaster. The lesson: even if you’re behind, prompt and strategic action can transform a dire situation into a manageable one.

Common Questions on Unremitted GST/QST

Q: Will the CRA or Revenu Québec forgive penalties and interest if I explain my situation?
A: Not easily. Both agencies are generally strict about collecting all interest and at least base penalties on unremitted tax. They view interest as compensation for the time-value of money you held, and penalties as the consequence for non-compliance. That said, there are avenues to request relief. The CRA’s taxpayer relief program (and Revenu Québec’s equivalent) may cancel penalties or interest only in extraordinary circumstances – for example, if a natural disaster, serious illness, or other factor beyond your control caused the delay. Simply saying “I had cash flow issues” or “I forgot” won’t cut it. However, if you come forward through the Voluntary Disclosure Program before they start chasing you, CRA will waive the penalties by policy (interest would still apply). In Quebec, voluntary disclosure can also spare you penalties. In our experience, the best way to avoid penalties is to act before the tax authority expends resources to go after you. Once an audit or enforcement is underway, they feel justified in charging every dollar of penalty. Also, early communication can sometimes halt additional penalties – e.g. if you file all overdue returns and alert Revenu Québec before they issue arbitrary assessments, you can avoid the hefty estimated assessment penalties. In summary: don’t count on “forgiveness” by pleading, but use formal channels like disclosure or relief requests with a strong rationale. And of course, if you fix the issue quickly, there will simply be fewer penalties to begin with.

Q: I’m a director. Am I really personally liable for the company’s unremitted GST/QST?
A: Yes – very much so. As discussed above, tax laws empower the government to hold directors personally liable for unremitted sales taxes. If the company doesn’t pay, they can and will come after directors (potentially all directors jointly) to collect the balance. This isn’t an idle threat; it happens regularly. The liability isn’t automatic – they usually issue a Director’s Liability Assessment and you have the chance to pay or argue a due diligence defense. But unless you have a convincing defense (e.g. you can prove you did everything a prudent person would, but it still failed, or you truly had no knowledge of the issue due to someone’s deceit), you’re likely to be held accountable. Notably, the liability extends to interest and penalties too, not just the tax. Many directors think if the company dissolves or declares bankruptcy, the problem disappears. It does not – the Crown will transfer the debt to you personally. Also, if there are multiple directors, the government can pursue any or all of them (whoever has ability to pay). They don’t apportion it evenly; they’ll collect the easiest way possible, then it’s up to directors to sort out contributions among themselves. There is a two-year limitation after you resign as a director during which you can be assessed. This means if you resigned more than 2 years before the assessment is raised, you’re off the hook. But if the non-remittance happened while you were a director, resignation doesn’t absolve the earlier liability. Bottom line: if you’re listed as a director of a company with tax debts, take it extremely seriously. Your house, savings, and wages could be at risk. Engage professional help to protect your interests and ensure the company’s compliance or an exit strategy. Directors should never just assume “it’s the company’s problem” – under Canadian tax law, it swiftly becomes your problem.

Q: Should I voluntarily disclose unremitted taxes or just wait and see?
A: If you have unremitted GST/QST that the government hasn’t yet acted on, waiting is the worst thing to do. Voluntary disclosure is almost always the better choice, assuming you qualify (i.e. your disclosure is truly voluntary and complete). By coming forward first, you gain some control over the narrative and can access penalty relief programs. If you “wait and see,” a few outcomes are likely: either the CRA/Revenu Québec will find out through cross-checks or an audit (and then you’re ineligible for VDP and will face full penalties), or interest continues to mount and the problem snowballs. Some people hope that a small GST liability might “slip through the cracks” if they close the business quietly – that is a dangerous gamble. The risk of personal director liability remains for years, and the tax agencies have sophisticated systems to catch non-filers and discrepancies. By contrast, a voluntary disclosure essentially immunizes you from the worst penalties and any criminal prosecution threat, in exchange for honesty and paying what’s owed. It’s an opportunity to wipe the slate clean. The process does require you to pay the tax and interest, so you need a plan for that (they won’t approve a disclosure that you can’t follow through on financially – usually you have to pay in full or have a firm payment arrangement). But again, you could save a significant amount in penalties by disclosing. Another benefit: it brings peace of mind. Constantly worrying “will the CRA find out?” is stressful and distracts from running your business. Once you disclose and settle, you can move on. The only scenario where waiting might be advised is if you truly cannot afford to pay or make arrangements, in which case you might consult a professional about whether insolvency or a consumer proposal is a more realistic route. However, even in insolvency, certain GST/QST debts have super-priority and director liability doesn’t go away unless addressed, so it’s not a get-out-of-jail card. In sum: disclose voluntarily if you still can – it’s far better to come forward on your terms than to be caught on the taxman’s terms.

Q: If I can’t pay the full amount now, will they accept a payment plan?
A: Typically, yes, both CRA and Revenu Québec will work out a payment plan for GST/QST arrears, but you need to propose a reasonable timeline. They won’t let the debt hang forever, but they understand that immediate full payment is not always possible, especially if the amount is large. Usually, you’ll need to demonstrate your financial situation – for a business, that might mean providing cash flow projections or bank statements; for an individual director, maybe a statement of assets/liabilities. The agencies want to ensure you’re not hiding money while pleading poverty. If convinced of your sincerity, they often allow installment plans, commonly ranging from a few months up to 12–18 months. Interest generally continues to accrue on the outstanding balance during the payment period (so faster is better if you want to minimize interest). One crucial thing: stick to the schedule. If you default on a payment plan, trust erodes quickly. You might not get a second chance before they take enforcement action. Also, while on a plan, you must stay current on all new filings and remittances – if you miss a current payment while paying off the old, the plan can be nullified. In our practice, we often negotiate plans where a significant upfront payment is made (to show good faith and reduce the principal), and the rest is spread over a year or so. The more you can pay up front, the more willing they usually are to extend the remainder. For very large debts, sometimes a partial payment agreement can be reached (where if you pay a big chunk, they might write off some penalties or interest – but this is case-by-case and often requires proving that full collection would cause severe hardship or is not possible). In summary, payment plans are a common resolution – just approach the negotiation prepared and be realistic about what you can pay. Having a CPA negotiate can help ensure the plan is acceptable to both you and the tax agency.

Q: Could I face criminal charges for not remitting GST/QST?
A: Criminal prosecution is possible but reserved for the most blatant cases. The vast majority of non-remittance cases are handled through civil assessments, penalties, and collections. However, the law does provide for criminal charges if the failure to remit is willful (essentially tax evasion). For example, Section 327 of the Excise Tax Act makes it an offence to willfully fail to pay or remit tax when required. In practice, CRA might recommend prosecution if, say, a business was charging GST but not filing returns at all (hiding the liability), or if there’s fraud involved (like issuing fake invoices to cover the missing money), or if despite repeated civil enforcement the directors blatantly continue to not remit. Penalties on conviction can include hefty fines (ranging from 50% to 200% of the tax evaded, under the tax evasion provisions) and even jail time (up to 6 months for summary convictions, or more if proceeded by indictment. Revenu Québec has its own investigative branch and has laid charges in cases where business owners collected large amounts of QST/GST and pocketed it. A few high-profile cases have seen small business owners actually serve jail time for tax fraud. That said, if you are proactively addressing the issue, the chance of criminal action is virtually nil. The government typically uses criminal charges as a last resort or a deterrent example. Cooperate, don’t lie, and pay what’s owed – do that, and you’ll almost certainly keep this a civil matter. If you were aware of the issue and it went on for a long time, you might worry that by coming forward you’re confessing to an offense; but keep in mind the Voluntary Disclosure Program specifically offers protection from prosecution in exchange for compliance. If the situation has already escalated (e.g. an investigation has started), it’s critical to involve a tax lawyer to manage the risk. In short, while jail is highly unlikely for most who slip up on GST/QST remittances, it’s not an utter impossibility – so the smarter path is to treat the matter seriously and get it resolved well before anything that severe is contemplated by authorities.

Why Mackisen CPA?

Dealing with unremitted GST/QST is a high-stakes, high-stress situation. You don’t have to face it alone – and frankly, you shouldn’t. Mackisen CPA Montreal is uniquely equipped to assist businesses and directors in this exact predicament. Here’s why we stand out:

• Integrated Expertise: We are not just accountants – our team includes experienced CPAs, former tax auditors, and tax lawyers who have collectively handled hundreds of GST/QST compliance cases. This blend means we can both crunch the numbers and negotiate with authority. Whether it’s preparing accurate back filings or crafting legal arguments for relief, we have you covered in one coordinated approach. Big-4 firms often bring multidisciplinary teams to complex problems – at Mackisen, we offer the same 360° service, but with personalized attention.

• 35+ Years of Experience: Our senior professionals have decades of experience navigating CRA and Revenu Québec processes. We know how these agencies operate in the Montreal region. We’ve built relationships with local Revenue officers and understand the unwritten protocols that can smooth out negotiations. When you engage Mackisen, you gain the advantage of our hard-won insight into audit triggers, collection tactics, and successful settlement strategies. We’ve literally seen it all – from mom-and-pop shops with one missed return to sizable corporations in Montreal facing millions in GST/HST audits. That depth of experience translates into high-trust, authoritative guidance for our clients.

• Urgent Response – “SWAT Team” for Tax Crises: If you’re in a time-critical bind (e.g. you got a notice of assessment or a director liability warning), we can mobilize quickly. Our firm has a culture of treating client emergencies with top priority. For example, we have turned around multi-period GST/QST filings in a matter of days to meet a deadline, as highlighted in our case study We know that when it comes to unremitted taxes, speed can save thousands in penalties. Our audit defence practice means we are always ready to step in and communicate with tax authorities on short notice – often halting aggressive collection actions simply by taking over the file and showing a plan. You get Big-4 level responsiveness without the red tape.

• Strategic Negotiation & Director Protection: Negotiating with tax authorities is an art as much as a science. We bring an objective, professional tone to discussions with CRA and Revenu Québec, removing the emotion and fear that clients often feel. By presenting facts, documentation, and fair proposals, we often obtain more favorable terms – be it abatement of penalties, extended payment plans, or even acceptance of a partial financial hardship settlement in rare cases. Moreover, we never lose sight of protecting you, the client. If you’re a director at risk, our first thought is shielding your personal assets. We’ll advise on steps like formal corporate resolutions or timely resignation considerations to limit exposure, as well as directly engaging with the agencies to potentially delay or prevent a personal assessment while the company’s plan is ongoing. Essentially, we act as your advocate and buffer: the tax authorities communicate with us, and we handle the tough calls and letters, so you can focus on running your business (or rebuilding it) without constant anxiety.

• Montreal’s Trusted Partner for Sales Tax Issues: As a leading CPA firm in Montreal, we’ve built a reputation for resolving GST/QST problems efficiently and discreetly. We understand the local business environment, the dual tax system in Quebec, and the nuances between dealing with Ottawa vs. Quebec City on tax matters. Our office (conveniently located near Complexe Desjardins) has helped countless Quebec entrepreneurs get out of hot water with Revenu Québec and the CRA. We take pride in not just fixing the immediate issue, but also empowering our clients with better processes going forward Our philosophy is that every crisis is an opportunity to put stronger controls in place. When the dust settles, you’ll not only be compliant, but far less likely to face the same issue again – because we will have set you up with the tools and knowledge to keep it that way

In summary, Mackisen CPA offers the full package of audit defence, tax compliance, and business advisory to guide you through resolving unremitted GST/QST issues. We operate with the authoritative rigor of a Big-4 firm’s whitepaper analysis, yet with the empathy and personal touch of a dedicated local advisor. If you’re in a situation where you’ve collected GST/QST and didn’t remit it timely, it’s urgent to act – and having the right professionals by your side can make all the difference between a manageable recovery and a financial catastrophe. Mackisen’s team is here to ensure it’s the former. Let us help you protect your business, your directors, and your peace of mind with our proven strategies and unwavering support.