GST/HST Voluntary Disclosure: Correcting Sales Tax Errors Before CRA Calls

GST/HST mistakes are extremely common — especially for small businesses, contractors, restaurants, e-commerce sellers, landlords, consultants, and rapidly growing companies. But once CRA discovers an error, the penalties and interest can be severe. Fortunately, the GST/HST Voluntary Disclosures Program (VDP) allows businesses to correct past GST/HST mistakes before CRA contacts them and avoid penalties, reduce interest, and prevent full-scale audits. This guide explains when to use the VDP, which GST/HST errors qualify, how to file a strong application, and how CRA evaluates submissions.

Why Businesses Need GST/HST Voluntary Disclosure

GST/HST is a trust tax. If you collected GST/HST or should have collected it, CRA treats non-remittance or incorrect filings as a serious offence. Businesses enter VDP to fix:
unfiled GST/HST returns
underreported sales
overclaimed Input Tax Credits (ITCs)
failure to register for GST/HST
incorrect GST/HST rates
place-of-supply mistakes
digital platform tax issues
GST/HST collected but not remitted
cash sales not reported
Mistakes corrected voluntarily receive far better treatment than those discovered in an audit.

What the GST/HST VDP Can Do

The Voluntary Disclosures Program may provide:
penalty elimination
partial interest relief
no prosecution
protection from GST/HST gross negligence penalties
correction of multiple years at once
ability to file missing returns safely
But VDP does not eliminate GST/HST owing — it removes penalties and reduces interest.

Who Qualifies for GST/HST VDP

To qualify, your disclosure must be:
voluntary — CRA has NOT contacted you
complete — all years and issues included
accurate — no omissions or hidden information
involving a penalty situation — the mistake is significant
before enforcement — before CRA audit/verification letters
If CRA begins a GST/HST review or sends ANY audit notice, you lose VDP eligibility.

Common GST/HST Errors Covered by VDP

1. Not Registering for GST/HST After Passing $30,000

Many freelancers, contractors, and online sellers miss this threshold.

2. Failing to Remit GST/HST Collected

Restaurants, construction companies, and trades face this issue frequently.

3. Filing Incorrect Returns

Incorrect sales or ITC claims across multiple periods.

4. Claiming ITCs Without Valid Documentation

Missing supplier invoices, invalid GST numbers, or personal expenses claimed incorrectly.

5. Not Charging GST/HST Properly

Wrong tax rates on:
digital services
interprovincial sales
e-commerce
consulting

6. Cash Sales Not Reported

CRA sees this often in hospitality, trades, personal services, and retail.

7. GST/HST on Real Estate

Incorrect rebates
new-construction GST errors
assignment sale issues

8. Digital Platform Errors

Shopify
Amazon
Uber
SkipTheDishes
OnlyFans
Platforms report income to CRA — errors must be corrected proactively.

What Disqualifies a GST/HST VDP Application

CRA will reject VDP if:
CRA already contacted you
you received an audit letter (review, verification, or questionnaire)
you file an incomplete disclosure
the error attempted to avoid tax intentionally
you are already under collection enforcement
You must act BEFORE CRA detects the mistake.

Two Streams of the GST/HST VDP

1. General Program (Most Common)

Penalty relief
partial interest relief
no prosecution
Used for unintentional errors or neglect.

2. Limited Program (High-Risk Situations)

Some relief
no prosecution
Used when CRA believes the error may have been deliberate.

How to Prepare a Strong GST/HST VDP Submission

Step 1: Identify ALL Problem Years and Issues

CRA requires completeness.

Step 2: Gather Documentation

sales records
bank statements
POS reports
supplier invoices
ITC documentation
platform payouts
place-of-supply calculations

Step 3: Recalculate Correct GST/HST Amounts

This often requires full bookkeeping reconstruction.

Step 4: Draft a Voluntary Disclosure Letter

Explain:
what happened
why the error occurred
why it was not intentional
your commitment to compliance

Step 5: File the VDP Package Through CRA’s System

Include all corrected filings, calculations, and documentation.

Step 6: Wait for CRA Review

CRA may ask additional questions or request more proof.

Step 7: Pay Amount Owing or Arrange a Payment Plan

CRA may require partial payment before finalizing acceptance.

Benefits of Correcting GST/HST Errors Through VDP

avoids penalties up to 10–50%
avoids gross negligence penalties
reduces interest
avoids audits
protects directors from personal liability
builds a clean compliance record
Businesses that wait until CRA discovers an error face significantly harsher consequences.

What Happens After VDP Is Accepted

CRA issues:
a written acceptance letter
a corrected GST/HST assessment
reduced penalties
adjusted interest
Your file is marked as compliant moving forward.

When Taxpayer Relief Is Better Than VDP

If CRA has already contacted you, use:
Taxpayer Relief (RC4288) → reduces interest
Notice of Objection → disputes incorrect assessments
But Taxpayer Relief cannot eliminate GST/HST penalties, only reduce interest.

When VDP Helps Avoid Criminal Investigation

VDP protects you from prosecution for:
failing to remit trust taxes
deliberate underreporting
cash sales
false ITCs
CRA uses prosecution only in extreme cases — VDP eliminates this risk.

Mackisen Strategy

At Mackisen CPA Montreal, we evaluate eligibility for GST/HST VDP, reconstruct financial records, prepare accurate GST/HST corrections, draft full disclosure letters, submit complete applications, respond to CRA questions, negotiate payment plans, and protect clients from penalties and prosecution.

Real Client Experience

A Montreal contractor avoided gross negligence penalties after correcting three years of unremitted GST. A Shopify store owner used VDP to fix missing GST filings and eliminated $18,000 in penalties. A restaurant owner corrected POS underreporting safely. A consultant eliminated all late-filing penalties through a complete GST/HST disclosure.

Common Questions

Can CRA reject my VDP? Yes — if they contacted you first. Does VDP eliminate tax owing? No — only penalties and interest. Can I file VDP myself? Risky; incomplete submissions are rejected. Does VDP apply to GST and QST? Yes — both federal and Quebec programs exist.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses correct GST/HST errors safely, eliminate penalties, avoid CRA audits, and restore compliance through expert VDP representation.