GST/QST Mistakes New Entrepreneurs Make in Their First Year — And How to Avoid Revenu Québec Penalties

Introduction

New entrepreneurs in Quebec often start their business with enthusiasm but little clarity about GST/QST rules. Whether it’s a side hustle, consulting work, online sales, or a new corporation, the first year is when most sales tax errors happen — and Revenu Québec closely monitors new registrants.
Missing registration deadlines, charging the wrong rates, claiming ineligible ITCs/ITRs, or filing late can quickly turn into penalties, interest, and even audits.
This guide explains the most common GST/QST mistakes new businesses make and how to stay fully compliant from day one.

Legal and Regulatory Framework

Under the Excise Tax Act (GST) and the Taxation Act (QSTA), new registrants must:

• Register for GST/QST once their taxable supplies exceed $30,000 in a single quarter or over four consecutive quarters.

• Charge and collect GST/QST on taxable supplies.

• Remit collected tax by the assigned filing deadline.

• Claim input tax credits (ITCs for GST) and input tax refunds (ITRs for QST) only for eligible business expenses.

• Maintain invoices, receipts, and payment proof for six years.

• Keep separate records for business and personal transactions.

Failure to comply may result in:

• Interest on late filings (ETA s.280, QSTA s.28)

• Penalties for late remittance or incorrect reporting

• Denial of ITCs/ITRs under ETA s.169(4) and QSTA s.39

• Record-keeping penalties under ETA s.286 and QSTA s.24

Key Court Decisions

Courts have repeatedly held that:

• “Newbie mistakes” do not exempt entrepreneurs from penalties.

• GST/QST must be remitted even if the business forgets to charge customers.

• Poor documentation is sufficient to deny ITCs/ITRs, even for legitimate purchases.

• Ignorance of the law is not a defence in sales tax cases.

These decisions make it clear that even first-year businesses must meet full compliance standards.

Why CRA and Revenu Québec Target These Issues

New entrepreneurs are a major audit target because:

• Many do not understand when they must register.

• First-year returns often contain incorrect GST/QST coding.

• Cash flow problems lead to late remittances.

• Personal expenses are often mixed with business expenses.

• Large refund claims in the first year raise red flags.

• Online sellers frequently misclassify taxable vs zero-rated sales.

Industries most affected include freelancing, consulting, construction, e-commerce, food services, fitness training, and digital media.

Mackisen Strategy

We help new businesses implement audit-proof GST/QST systems from the start.

1. First-Year GST/QST Compliance Setup

We guide entrepreneurs through:

• Registration (or voluntary registration when tax benefits apply)

• Charging correct rates based on industry

• Setting up tax codes in QuickBooks, Shopify, Square, or other systems

2. Input Tax Credit Planning

We review all early-stage expenses to:

• Identify eligible ITCs/ITRs

• Separate personal and business costs

• Correct incomplete or non-compliant invoices

3. Filing and Remittance Calendars

We prevent penalties by setting:

• Automated reminders

• Quarterly or annual filing schedules

• Payment planning for remittances

4. Clean Bookkeeping Structure

We ensure:

• Bank accounts are properly separated

• Expense categories are correctly mapped

• GST/QST is tracked reliably for each transaction

5. First-Year Audit Defence

If the government sends a review notice, we:

• Prepare documentation

• Respond directly to CRA/Revenu Québec

• Provide legal argumentation

• Handle all communications on your behalf

Real Client Experience

A new online seller registered for GST/QST but failed to update his Shopify tax settings. For eight months, orders were processed without charging taxes.
Revenu Québec assessed over $4,000 in uncollected QST — even though the business never received that money from customers.
After our intervention, we negotiated a payment arrangement and corrected all system settings, preventing future penalties.

Common Questions

1. When must I register for GST/QST?
Once your taxable sales exceed $30,000 in any 12-month period — or sooner if beneficial.

2. What if I didn’t charge GST/QST but should have?
You still owe the tax to the government. Corrections must be filed.

3. Can I claim ITCs/ITRs before officially registering?
No. Only post-registration expenses are eligible.

4. Are first-year refunds risky?
Yes. They often trigger review or audit due to high-credit patterns.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps businesses stay compliant while recovering the taxes they’re entitled to. Whether you’re filing your first GST/QST return or optimizing multi-year refunds, our expert team ensures precision, transparency, and protection from audit risk.

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