How does the small-supplier HST rule apply to a new practice?

Under Excise Tax Act s. 148, a health-service or dental practice with total worldwide taxable revenues below $30,000 over four consecutive calendar quarters is a small supplier and is not required to register for HST. Because most professional health services are exempt (ETA Sch V Pt II) rather than taxable, the $30,000 threshold is calculated on taxable revenue only, which for a physician or dentist can mean an indefinitely long small-supplier status.

Practical example: a new Ontario family physician starts a solo clinic. All billings are OHIP-covered medical services, exempt under ETA Sch V, Pt II, s. 5. Taxable revenue: $0. The physician stays a small supplier indefinitely and is not required to register for HST. The physician also cannot claim any ITCs on the practice’s overhead, because unregistered small suppliers are not eligible for ITCs.

A dentist starting a new practice with a small cosmetic-whitening line has to watch two thresholds: the overall $30,000 small-supplier threshold applied to taxable revenue (cosmetic + retail product sales), and the practical benefit of voluntary registration to recover HST on major startup expenses (dental chairs, cabinetry, computer systems).

Voluntary registration under s. 240(3) is available from day one. The tradeoff: you must charge HST on all taxable supplies from registration date, but you recover ITCs on all overhead HST proportionally under s. 141.01. For a practice with significant startup capital costs, voluntary registration can recover $10,000 to $30,000 of HST in the first year.

Note: Once you register, deregistering is administratively painful and typically waits for the practice to close. Register only if the ITC recovery justifies the ongoing compliance obligation.

Source: canada.ca — When to register for GST/HST

— Bader A. Chowdry, CPA, CA, LPA — Insight Accounting CPA

Disclaimer: Bader A. Chowdry, CPA, CA, LPA is a Licensed Public Accountant regulated by CPA Ontario. Insight Accounting CPA Professional Corporation is a Chartered Professional Accountant firm. This content is general information only and does not constitute professional advice for your specific facts. Confirm current rules and figures with your own advisor before acting.