Sales tax compliance is one of the most important responsibilities for small businesses operating in Quebec. Whether your company sells goods, services, or a combination of both, you must follow detailed GST and QST rules to avoid penalties, interest, and audits from Revenu Québec. Because many small businesses rely on manual processes, POS systems, or basic spreadsheets, errors are common — especially during rapid growth or seasonal fluctuations. This detailed compliance checklist provides small businesses with a clear, simple, and audit-ready framework to ensure full GST/QST compliance in Quebec.

Proper compliance protects your business from unexpected liabilities, ensures accurate financial reporting, and builds trust with customers, suppliers, and lenders. Many issues arise simply from inconsistent processes or a lack of documentation, both of which can be resolved with a strong checklist maintained regularly.

LEGAL AND REGULATORY FRAMEWORK

GST is administered under the Excise Tax Act and QST under the Quebec Taxation Act. All businesses that exceed thirty thousand dollars in annual taxable revenue must register for GST and QST. Once registered, the business must collect, report, and remit GST and QST on all taxable supplies. Records must be kept for a minimum of six years, including invoices, receipts, contracts, bank statements, and credit notes.

Sales tax compliance also requires proper classification of supplies: taxable, zero-rated, or exempt. Failing to classify sales correctly can result in incorrect tax reporting and reassessments. Small businesses must ensure that their GST/QST returns reflect accurate taxable sales, allowable input tax credits, and applicable adjustments based on their activity.

KEY COURT DECISIONS

Courts across Canada and Quebec have reinforced that businesses must maintain precise and verifiable documentation for sales tax reporting. In several cases, businesses failed to claim input tax credits due to missing invoices or incomplete documentation, leading to denied credits and penalties. Courts upheld Revenu Québec’s reassessments, emphasizing that taxpayers carry the burden of proof.

In disputes involving misclassification of taxable versus exempt supplies, judges concluded that businesses must demonstrate their understanding of tax rules and provide clear evidence supporting their reporting. These decisions highlight the importance of robust internal compliance systems and a reliable checklist.

WHY CRA AND REVENU QUÉBEC TARGET SMALL BUSINESSES

Small businesses are frequently audited because they often lack formal accounting systems, have inconsistent documentation, or rely on manual tax processing. Common red flags include discrepancies between GST/QST and income tax filings, fluctuating tax totals, unusually high input tax credits, and POS reports that do not match filed returns.

Industries frequently targeted include retail, restaurants, construction, wellness services, salons, e-commerce shops, independent contractors, and home-based businesses. These sectors often operate with high transaction volumes or diverse services that may complicate tax classification.

COMPLIANCE CHECKLIST FOR SMALL BUSINESSES

1. Confirm GST/QST Registration
   Ensure your business is properly registered and that tax numbers appear on all invoices and receipts.

2. Classify All Sales Correctly
   Distinguish between taxable, zero-rated, and exempt supplies and apply GST/QST accordingly.

3. Verify POS and Invoicing Settings
   Ensure your POS system and invoicing software apply correct tax codes and rates without manual overrides.

4. Record GST/QST Collected Daily
   Track sales tax collected each day and reconcile against POS or bookkeeping reports.

5. Maintain Complete Supplier Invoices
   Keep invoices that show supplier names, GST/QST numbers, amounts, descriptions, and tax breakdowns.

6. Separate Personal and Business Expenses
   Claim only business-related expenses for input tax credits; personal expenses cannot be included.

7. Reconcile Input Tax Credits Monthly
   Match eligible expenses to tax periods and ensure documentation is complete.

8. Track Returns, Refunds, and Adjustments
   Record credit notes and refunds accurately so they reconcile with GST/QST returns.

9. Review GST/QST Control Accounts
   Ensure your general ledger reflects tax collected and tax paid accurately.

10. Prepare Audit-Ready Files
    Keep organized folders for each period that contain your sales reports, expense documentation, reconciliations, and final return.

11. Monitor Filing Deadlines
    File on time — monthly, quarterly, or annually — to avoid penalties and interest.

12. Resolve Discrepancies Promptly
    Investigate unusual totals, mismatches, or missing invoices before filing a return.

A small business that follows this checklist consistently will greatly reduce risks and ensure smooth GST/QST compliance.

MACKISEN STRATEGY

Mackisen CPA supports small businesses by creating customized GST/QST compliance systems. We analyze your business model, configure your POS and accounting systems, review documentation practices, and prepare detailed compliance calendars. We assist businesses in classifying their supplies, optimizing input tax credit claims, and structuring their internal processes to minimize errors.

Our firm also performs regular GST/QST reconciliations, handles return preparation, and responds to Revenu Québec inquiries on your behalf. For growing businesses, we help scale systems so that increased transaction volumes do not jeopardize compliance.

REAL CLIENT EXPERIENCE

A small boutique in Montreal experienced repeated discrepancies between POS reports and GST/QST returns. Mackisen standardized their procedures, updated tax codes, and created a compliance checklist. Errors were eliminated, and their next filing passed without questions.

A self-employed contractor misclassified several services as exempt, causing under-collection of taxes. Mackisen corrected the classifications, adjusted past returns, and built a guide to prevent future mistakes.

An online shop operated by a startup failed to maintain supplier invoices, leading to denied input tax credits during an audit. Mackisen reconstructed missing documentation, corrected filings, and implemented a digital invoice management system going forward.

COMMON QUESTIONS

Do all small businesses in Quebec need to charge GST/QST?
Not until taxable revenue exceeds thirty thousand dollars, but voluntary registration is often beneficial.

Can I file GST/QST myself?
Yes, but a CPA helps avoid mistakes that may trigger audits, especially as your business grows.

What happens if I miss a filing deadline?
Penalties and daily interest apply. Repeated delays increase audit risk.

How do I track GST/QST if my business is seasonal?
Use monthly reconciliation even during slow periods to avoid surprises at remittance time.

Can input tax credits be denied?
Yes. Missing or incomplete invoices often lead to denials during reviews.

WHY MACKISEN

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps small businesses remain fully compliant with GST/QST rules. We build customized compliance checklists, train business owners, correct past filings, and ensure every return is accurate, complete, and audit-ready.