Top GST/HST Mistakes and How to Avoid Them – A Complete Guide by a Montreal CPA Firm Near You

Introduction

GST/HST is one of the most misunderstood parts of running a business in Canada. Whether you’re self-employed, incorporated, selling online, providing services, or managing a retail operation, errors in GST/HST setup, collection, or filing can lead to serious CRA consequences. Many businesses accidentally charge the wrong rate, claim ineligible input tax credits (ITCs), file late, miss returns entirely, or misunderstand place-of-supply rules. These mistakes often trigger CRA audits, reassessments, penalties, and interest. Understanding the most common GST/HST mistakes—and how to avoid them—is essential for every Canadian business. This guide highlights the biggest errors businesses make and how to build an audit-proof GST/HST system.

Legal and Regulatory Framework

GST/HST compliance is governed by the Excise Tax Act, which requires registered businesses to:

• charge the correct GST/HST rate based on place of supply rules
• remit sales tax collected
• file GST/HST returns on time (monthly, quarterly, or annually)
• claim ITCs only on eligible expenses used in commercial activities
• issue invoices with correct GST/HST registration numbers
• maintain records for at least six years

CRA imposes:
• late-filing penalties
• interest on unpaid GST/HST
• denial of ITCs for missing or incorrect documentation
• assessments for uncollected tax

These laws form the basis for identifying and correcting GST/HST errors.

Key Court Decisions

Several key court rulings demonstrate how strictly CRA enforces GST/HST rules:

In Cornwallis Financial Corp. v. Canada, the Federal Court upheld CRA’s denial of ITCs due to insufficient invoice documentation.

In Global Cash Access v. Canada, GST/HST misclassification resulted in reassessments, reinforcing the importance of correct interpretation of taxable supplies.

In Movies Plus Ltd. v. Canada, CRA reassessed a business for charging GST instead of HST; the court confirmed that place-of-supply errors must be corrected—even if unintentional.

In Air Canada v. Canada, the Supreme Court clarified that GST/HST is a strict liability tax—meaning businesses owe tax even if they mistakenly fail to collect it.

These decisions highlight why correct GST/HST practices are critical.

Why CRA Targets This Issue

CRA aggressively audits GST/HST because errors are common and financially significant. CRA focuses on:

• failing to register once surpassing the $30,000 threshold
• charging the wrong rate (GST vs HST)
• not charging QST in Quebec when required
• claiming ITCs without valid invoices
• missing GST/HST returns or late filings
• underreported sales based on bank deposits
• businesses collecting GST/HST but not remitting it
• online sellers with incorrect digital tax settings
• improper Quick Method use
• expenses not connected to commercial activity

CRA also cross-checks GST/HST filings with income tax returns, payment platforms, and POS systems to find discrepancies.

Mackisen Strategy

At Mackisen CPA Montreal, we help businesses eliminate GST/HST errors before CRA catches them. Our structured GST/HST compliance system includes:

1. Correct Registration

• analyzing whether you must register
• registering for GST/HST and QST properly
• determining filing frequency and reporting periods

2. Applying Correct Tax Rates

• building a province-by-province place-of-supply matrix
• training clients on interprovincial sales tax rules
• configuring GST/HST settings in Shopify, Amazon, Etsy, Stripe, QuickBooks, and invoicing tools

3. Validating ITCs

• ensuring all receipts include GST numbers
• verifying business-use percentages
• removing ineligible expenses (meals 50%, personal use, exempt activity expenses)

4. Reconciling Sales

• reconciling bank deposits, invoices, and platform payouts
• ensuring all taxable sales are captured

5. Filing and Remitting Correctly

• preparing GST/HST returns
• setting up payment reminders
• correcting past returns through voluntary disclosure if necessary

Our preventive approach protects businesses from penalties and ensures smooth CRA compliance.

Real Client Experience

A consultant charged GST to Ontario clients instead of HST. CRA reassessed her thousands in uncollected HST. We corrected her returns and implemented correct place-of-supply rules.

An online seller filed GST/HST but forgot to file corresponding QST returns for Quebec customers. Revenu Québec intervened. We registered the business properly and brought all filings up to date.

A contractor claimed ITCs on undocumented expenses. CRA denied them. We rebuilt his documentation system and recovered allowable credits.

A freelancer missed three GST/HST filings. CRA assessed estimated amounts and penalties. We filed accurate returns, corrected the assessments, and set up a compliance schedule.

Common Questions

Business owners often ask whether CRA forgives GST/HST mistakes. CRA rarely waives GST/HST unless a Voluntary Disclosure is filed.

Others ask whether GST/HST applies to U.S. clients. Exports are zero-rated but require documentation.

Some ask whether charging the wrong tax rate can be corrected. Yes—but uncollected tax must usually be paid by the business.

Another question: Can GST/HST be included in the price instead of added? Yes—if clearly indicated.

Why Mackisen

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps Canadian businesses avoid costly GST/HST mistakes through proactive compliance, accurate filings, and expert guidance. Whether you’re new to GST/HST or correcting past errors, our team ensures precision, transparency, and full CRA protection.