WHAT’S THE PENALTY FOR NOT REGISTERING FOR QST WHEN REQUIRED?

Many Quebec entrepreneurs unknowingly cross the $30,000 threshold and fail to register for QST on time. Others assume their services are exempt, misunderstand the “small supplier” rule, or delay registration until they “get organized.” Unfortunately, Revenue Québec does not take late registration lightly. Failing to register for QST when required creates retroactive tax liability, penalties, interest, and major compliance issues — even if the mistake was unintentional.

This guide explains the legal consequences of failing to register on time, what penalties apply, and how to fix the problem before it escalates.

LEGAL AND REGULATORY FRAMEWORK

The obligation to register is defined in the:

• Quebec Taxation Act
• Excise Tax Act (parallel GST rules)

A business must register for QST when its worldwide taxable revenues exceed $30,000:

• over the last four consecutive calendar quarters, or
• in a single calendar quarter

Once the threshold is exceeded, registration is mandatory immediately.

KEY COURT DECISIONS

Courts have consistently ruled that:

• ignorance of the threshold is not a defence
• businesses are liable for QST they should have collected — even if they never invoiced it
• penalties and interest apply automatically
• customers are not required to pay retroactive tax
• failure to register early enough justifies full reassessment

These rulings reinforce that businesses must monitor revenues proactively.

WHY BUSINESSES FAIL TO REGISTER ON TIME

Common reasons include:

• misunderstanding the $30,000 threshold
• confusing exempt vs. taxable services
• believing QST only applies to product sales
• assuming online sales are exempt
• mixing personal and business revenue
• not tracking quarterly totals
• rapid business growth
• incomplete bookkeeping

Regardless of the cause, registration becomes mandatory as soon as the threshold is crossed.

WHAT IS THE PENALTY FOR NOT REGISTERING FOR QST WHEN REQUIRED?

Here are the consequences businesses face when they don’t register on time.

1. REVENUE QUÉBEC CAN ASSESS RETROACTIVE QST

If you should have been registered:

• Revenue Québec will calculate all QST you should have charged,
• add the amounts together,
• and assess you for the full balance.

This amount must be paid out-of-pocket if clients will not pay retroactively.

2. PENALTIES FOR FAILURE TO REGISTER

Revenue Québec applies penalties for:

• failing to register
• failure to collect QST
• failure to remit QST
• late filing
• late payment

Penalties vary depending on the length of delay and amounts involved.

3. INTEREST ON UNPAID QST

Interest accumulates:

• daily
• from the date QST should have been remitted
• at rates set by Revenue Québec (often higher than bank rates)

Interest can exceed the tax itself if registration was late for multiple years.

4. CANNOT CLAIM INPUT TAX REFUNDS (ITRs) UNTIL REGISTERED

If you are not registered, you:

• cannot claim QST paid on expenses
• lose the ability to recover tax on equipment, rent, software, subcontractors, etc.

This increases your operating cost by nearly 10% on every purchase.

5. RISK OF AUDIT SELECTION

Late registration is a red flag. Revenue Québec frequently audits businesses that:

• exceed $30,000 without registering
• make high refund claims after registering late
• show inconsistent invoicing
• misclassify services as exempt

An audit can extend to GST, payroll, corporate tax, and personal accounts.

6. RETROACTIVE INVOICING IS NOT ALWAYS POSSIBLE

Customers are not obligated to pay QST retroactively.

If clients refuse:

• the business absorbs the cost
• QST owed must be paid from business funds
• this reduces profitability significantly

This is especially painful for service providers.

7. DELAYS IN GETTING REFUNDS

If late registration is followed by a refund claim:

• Revenue Québec may hold the refund
• require complete documentation
• review multiple years
• verify supplier invoices

This can delay cash inflow for months.

8. REPUTATIONAL AND BUSINESS IMPACT

Late registration may:

• create mistrust with clients
• complicate financial reporting
• affect financing and due diligence
• require correcting invoices
• lead to costly administrative cleanups

HOW TO FIX LATE QST REGISTRATION

The sooner you act, the better. Steps include:

Step 1 — Register immediately

Even if late, registration stops future penalties.

Step 2 — Reconstruct revenue records

Identify:

• when you crossed $30,000
• how much QST should have been charged
• which clients were taxable

Step 3 — Calculate retroactive QST

Work with a CPA to calculate:

• QST owing
• interest
• penalties

Step 4 — Consider issuing corrected invoices

If appropriate and acceptable to clients.

Step 5 — Claim missed ITRs

Once registered, you may claim ITRs on valid past expenses (limitations apply).

Step 6 — File voluntary disclosure (if needed)

For multi-year non-registration, the VDP may reduce penalties.

Step 7 — Implement tracking going forward

Set up systems to ensure you never miss the threshold again.

MACKISEN STRATEGY

Mackisen CPA helps businesses resolve late QST registration by:

• calculating retroactive QST
• preparing voluntary disclosure applications
• correcting invoices and client communication
• filing missing returns
• claiming eligible ITRs
• negotiating with Revenue Québec
• building tracking systems to prevent recurrence

Our structured approach minimizes penalties and interest while restoring full compliance.

REAL CLIENT EXPERIENCE

A freelancer exceeded the $30,000 threshold but registered a year late. Mackisen reconstructed revenues, filed returns, and minimized penalties.

A contractor mistakenly believed his services were exempt. Mackisen corrected the classification and negotiated reduced interest.

An e-commerce seller crossed the threshold during a high-growth period. Mackisen registered them properly and avoided a full audit.

COMMON QUESTIONS

What if I only exceeded $30,000 for one month?
If it pushes your total above $30,000 for the quarter, registration is mandatory.

Can penalties be waived?
Possibly through voluntary disclosure or relief programs.

Can I claim ITRs retroactively?
Sometimes. A CPA can determine eligibility.

Will late registration trigger an audit?
It increases the likelihood.

WHY MACKISEN

With more than 35 years of combined CPA experience, Mackisen CPA Montreal helps Quebec businesses correct late QST registration, reduce penalties, and avoid future compliance problems. Our expertise ensures your business remains protected and fully audit ready.