GST FAQ for Freelance Writers
Small Print: Before reading this GST FAQ, read the small print. Whether you read it or not, it is presumed that you have read it, agreed to and will abide by it before reading/applying any of the GST FAQ.
Small Print: Before reading this GST FAQ, read the small print. Whether you read it or not, it is presumed that you have read it, agreed to and will abide by it before reading/applying any of the GST FAQ.
Q. As a freelance writer, do I have to charge my clients—periodical, corporate, government, non-profit, educational, individual, etc.—GST?
A. If you earn over $30,000 per year, you have to charge all your clients GST. If you earn under $30,000 per year charging GST is optional.
If you earn over $30,000 in one quarter or over 4 consecutive quarters, you must register for and begin to charge GST to all clients except those that are GST exempt (see below).
Q. I have a GST number and have been charging corporate clients GST. Do I also charge newspapers GST?
A. Unless a client is GST exempt, you must charge GST to them, regardless of whether they conduct business as a corporate entity vs. an unincorporated entity. Newspapers (and magazines) are corporations. You have to charge them GST as well. If you write a wedding speech and you charge the groom for that service, you have to charge GST. If want to charge an even number, like $100, then you have to charge $94.34 plus $5.66 (6% GST) for a total of $100.00.
Note: if you are in a province that charges HST (Harmonized Sale Tax), your calculation will be different.
Q. I often bill corporate clients for an advance of 50%. Do I charge them GST on the advance or do I charge GST on entire amount on the final invoice?
A. Advances or deposits do not require GST; instead GST is charged at the time of issuance of the final invoice. If a deposit or advance is forfeited, then the advance is subject to GST. However, you can charge GST on the advance and then on the remainder due to you when you send your final invoice.
Q. I am on retainer with a company. They pay me for 7 hours of work a week, whether I work that amount or not. I send them an invoice every quarter for any additional funds they owe me as I sometimes exceed 7 hours. Should they include GST in the retainer fee or should I charge them GST each quarter when I invoice them?
A. GST is applicable to both the retainer fee and billings for additional work. It is up to you how GST is charged, so long as GST is charged for the full amount. (e.g. you could have GST added to the weekly retainers, as well as on the quarterly billings for additional work; or, you could treat the weekly retainers as advances/deposits, and each quarter bill for GST on that quarter’s weekly retainers as well as the additional work for the quarter).
Q. I have decided to collect GST (or I am making enough so that I have to collect GST). How do I get a GST number?
A. If you want to open a GST account, start here:
www.cra-arc.gc.ca/tax/business/topics/gst/corporation/registering/menu-e.html
Q. How long does it take to get a GST number once you register? Does it cost anything to register?
A. It costs nothing but your time to register for GST. If you register online via the Canada Revenue Agency (CRA) website or by telephone, registration is immediate and you will get written confirmation in a few days. Registering by mail takes longer.
Q. If I apply to collect GST this year, and I decide to take some time off down the road and know that my income will be under $30,000, can I stop collecting? If I apply to collect it, does it mean I have to collect it for the rest of my life even if my income goes down?
A. Registering and complying with filing requirements of GST is not necessarily a life sentence (although it may sometimes appear to be that way). If you normally file GST returns more frequently than annually (i.e. monthly or quarterly), you can temporarily stop filing GST returns for specific reporting periods during which you have little or no net GST to report by making a written request.
You cannot temporarily stop filing GST returns if you are an annual filer.
Q. I am not sure if I will earn over $30,000 this year, but I might. Do I start charging the moment I hit $30,000?
A. If you have taxable sales of more than $30,000 in one quarter (don’t you wish), you are automatically considered a registrant and must collect GST on the sale that put you over the $30,000 threshold. You have 29 days from the date of that sale to formally register for GST.
If you exceed the $30,000 threshold over a period of 4 consecutive quarters, you are considered to still be a small supplier over those 4 quarters plus the month following those 4 quarters. You would then start collecting GST on the first sale after the month following those 4 quarters, and have 29 days from the date of first sale to register for GST.
Q. What if I hit $30,000 in revenue but have not registered. Do I start collecting anyway?
A. See answer above.
Q. If I hit the $30,000 figure part way through the year, do I have to collect GST from the clients I wrote for before I hit $30,000?
A. See answer above.
Q. If I hit the $30,000 figure part way through the year, do I have to remit GST on all funds collected, even if I have not charged GST with the clients I wrote for before I hit $30,000?
A. See answer above.
Q. How do I collect GST? What does the client have to see on my invoice?
A. The client needs to see the GST amount separate from your fee for the service your provided. The client also needs to see your GST number. For instance, you might set up your invoice like this:
| Item | Amount |
| Magazine Article: How to Collect GST 1,000-word article |
$1,000.00 |
| GST# R139xxxxxx | 60.00 |
| Total: | $1,060.00 |
If you are billing for more than one item, include a sub-total before adding your GST:
| Item | Amount |
| Write Widget brochure copy | $1,000.00 |
| Edit Widget product description on Website | 500.00 |
| Sub-Total | $1,500.00 |
| GST# R139xxxxxx | 90.00 |
| Total: | $1,590.00 |
Q. I don’t earn $30,000 and do not anticipate earning that amount this year. Should I collect GST?
A. You do not have to collect GST, but if you chose not to collect GST you are letting your clients know that you earn less than $30,000 per year. If that matters to you, then you should collect GST. In addition, having a GST # on your invoice and charging GST makes you look more professional. Newspapers, magazines and most businesses charge GST and they all expect to pay GST so charging GST is not a deterrent to finding work.
By collecting GST, you in effect give yourself a raise because you are allowed to keep a portion of the GST that you collect (if you use the Quick Method – see below for details) or you deduct the GST you have spent on business expenses from the GST you collect and remit the difference to the government (if you use the Long Method – see below for details).
Since most if not all of your clients are likely to be able to recover GST that they paid, it makes economic sense in most cases to register for GST if your sales are less than $30,000.
Q. You anticipated my next question. I understand there are at least two ways of collecting GST—the Quick Method and the Long Method. Can you explain the differences? Which method do you suggest that freelance writers use?
A. It depends, and there is no ‘right’ answer that would fit all circumstances.
If you use the Quick Method, you continue to charge and collect GST in the normal manner; however, under the Quick Method you do not have to keep track of the GST you paid on business expenses (other than on capital cost items such as a computer, which are dealt with separately, as noted below).
To calculate the GST payable, take the your total sales (including GST charged on those sales), and multiply by the remittance rate applicable to services (4.3% for sales after July 2006; 5% for sales before then). Then take an additional 1% credit for the first $30,000 of sales. The remaining (balance) is what you send in as net GST payable. See example.
If you use the Long Method, you calculate the amount of GST you collected for the reporting period and the amount of GST you spent on all related business expenses. You subtract what you paid out in GST from what you collect and remit the difference. If you spent more on GST than you collect, you qualify for a refund. See example.
The Quick Method could be disadvantageous if you have a lot of expenses relative to sales. In order to determine if it is better than the Long Method, you would have had to compute the result using the Long Method for comparison purposes, which would seem to contradict the possible time savings in using the Quick Method.
Q. Can you show me some examples that demonstrate how I calculate GST using the Quick Method?
A. Quick Method:
Say your revenue, including GST, for the first quarter of 2007 totals $10,600. Since the GST rate is currently 6%, that amount includes $10,000 in sales and $600 in GST.
You would send the government a 4.3% remittance rate or $455.80 (less the 1% credit for the first $30,000 in sales of your total amount collected or $106). In this example, you would remit $349.80.
Once your sales exceed $30,000 in any given year, you have to remit 4.3% on the portion of your sales that exceeds $30,000.
Let’s say you had $10,000 in sales in the first quarter of 2007, $15,000 in the second quarter and $15,000 in the third quarter.
For the third quarter, you would remit 3.3% on the first $5,000 of sales and 4.3 % on the next $10,000 (or the amount by which you were over $30,000 in revenue). In the fourth quarter, you would remit 4.3 % of all revenue collected as you have already exceeded $30,000 in revenue in the third quarter.
Earlier, I mentioned capital costs. If you purchased a new computer (a capital expense) you can add the GST you paid on your computer to your GST tax credit. If your revenue, including GST, for the first quarter of the year totaled $10,600, you would send the government $349.80 (as per the above example). However, if you spent $1725 on a computer ($1500 + $105 GST + $120 PST in Ontario) you can deduct the $105 from your GST due. So you remit $244.80. In other words, you collected $600 in GST and you remit $244.80. You keep the remainder – $355.20 – and report that as part of your business income.
Q. Can you show me some examples that demonstrate how I calculate GST using the Long Method?
A. Long Method
When using the Long Method, you calculate how much GST you collected and how much you spend on business expenses. You subtract how much you spent from how much you collected and remit the difference.
Say your revenue, including GST, for the first quarter of 2007 totaled $10,600. Since the GST rate for the first quarter was 6%, that amount includes $10,000 in sales and $600 in GST. If you spend net $2500 on office supplies and other business expenses, your GST expenses would total $150. You send the government $600 minus $150 or a total of $450.
If your revenue, including GST, for the first quarter of the year totaled $10,600 ($600 in GST) and instead you spent net $12,500 on office supplies and other business expenses, your GST expenses would total $750 You can claim a GST rebate of $150.
Q. Do I charge all my clients GST? I understand some organizations are GST exempt. Is it up to me to ask or for them to tell me?
A. Federal, provincial, territorial and municipal government organizations are GST exempt and you do not charge nor collect GST from them. See below for comments dealing with native clients.
Q. If clients say they are GST exempt, do they have to show me documentation or a GST-exempt number I use on my invoice?
A. See comments above
Q. I have some American clients. Do I charge them GST?
A. No
Q. I have some clients outside North American. Do I charge them GST?
A. No
Q. I have some Native clients—individuals and bands. Do I charge the bands or individuals GST? If they say they are GST exempt, do they have to show me documentation or a GST-exempt number I use on my invoice?
A. You do not charge GST to native clients if you perform the services entirely on reserve. The native must present you with proof of registration under the Indian Act to purchase services without paying GST.
Q. Are royalties from book publishers exempt? When my publisher sends me a royal cheque for $2500, does that include GST and/or PST? Is it the same for every province? If it does not include GST, do I have to include it in my income when calculating GST?
A. Royalties from book publishers are not exempt. You should advise the publisher that you are registered for GST and that GST should be added to the royalty amount you have earned.
If you do not collect GST from the publisher, you are still responsible for remitting GST on the amounts received.
Q. If there are clients who I do not charge GST, do I still calculate GST on income from those clients? For instance, if I am using the Quick Method and I earn $10,000 in revenue, and $2,500 of that is generated by clients who do not pay GST, do I calculate the amount owing by multiplying $10,000 by 4.3% or multiplying $7,500 by 4.3%?
A. In this example, you would remit 3.3% of $7,500 (as long as your total revenue was under $30,000 at this point) or 4.3% of $7,500 if this is a quarter in which your revenue now exceeds $30,000.
Q. Once I choose a method, can I shift to the other method—from Quick to Long or from Long to Quick—if I find a switch is advantageous?
A. Once you elect to use the Quick Method, you must use if for a minimum of one year.
Q. Can I shift from one payment timeframe to another—from Quarterly to Annual or from Annual to Quarterly—if I find a switch is advantageous?
A. If your annual sales are less than $500,000, you are assigned an annual reporting period, but you may elect to report quarterly or monthly by filing Form GST20, Election for GST/HST Reporting Period.
Q. Are there any circumstances under which I have to use one Method rather than another?
A. If your annual sales are less than $200,000, you have the option to use the Quick Method. If your annual sales are more than $200,000, you must use the Long Method.
Q. Are there any circumstances under which I have to use one payment time frame rather than another?
A. See answer to second question above.
Q. Which provinces have harmonized the GST with their PST, producing the HST? Is the HST 14% in every province?
A. Nova Scotia, New Brunswick and Newfoundland and Labrador had an HST rate of 15% (before July 1, 2006). It is now 14% (after July 1, 2006).
Q. I live in an HST province, a province that has harmonized the GST and PST. Does that change any of your answers so far?
A. No.
Q. Do the GST rules change province by province?
A. Except for HST vs. GST rates, no. The GST is a federal tax; however, some provinces have harmonized their provincial sales tax with the GST. If you live in the 3 provinces listed above, you collect the HST.
If you live in a province that charges HST (harmonized GST and PST), read more about HST here: www.cra-arc.gc.ca/tax/business/topics/gst/corporation/hst/menu-e.html
In Quebec, Revenu Québec administers GST/HST. If you operate in Quebec, visit the Revenu Québec Web site: www.revenu.gouv.qc.ca/eng/services/sgp_inscription/index.asp
Q. I live in Nova Scotia, an HST province. If I sell an article to a Calgary magazine, newspaper or company, do I charge HST (15%) or GST (7%)? (I gather there is no PST in Alberta.) If I sell an article to a publication or company outside of NS but located in a province that collects PST, such as Ontario, do I charge HST or GST?
A. If you did the work in Nova Scotia, you would charge HST of 15% before July 1, 2006 and 14% after July 1, 2006, regardless of where your client is located.
Q. I want to use the Long Method and I live in an HST province. How do I calculate the HST on my business expenses?
A. HST has the same basic operating rules as GST; only the rates are different.
Q. Do I pay GST or HST on my rent or my mortgage? If so, and if I am deducting a portion of my rent/mortgage as a business expense, can I include the GST/HST paid in my HST/GST business calculations?
A. Assuming that rent paid is for your residence (i.e. not commercial rent), GST would not be paid on rent or mortgage.
Q. In PEI, you do not charge provincial sales tax on writing. However, if that writing is part of consulting services then you charge PST. Are there any similar GST anomalies that I, as a freelance writer and communications consultant, should be aware of?
A. This is a PST issue. From a GST point of view, all services you provide would be considered taxable supplies.
Q. I am incorporated. Does that change any of your answers so far?
A. No, GST rules are the same, whether incorporated or not.
Q. I use the Long Method. What is the best way to keep track of GST on purchases? Does one keep a record on paper, in a Word file or in an Excel spreadsheet? How much detail is required: date of purchase, item, total cost, PST, GST?
A. There is no best way that suits all circumstances. For most of you, a simple document (could be paper, WORD or Excel) that shows the date, total amount and GST portion of the item purchased is sufficient.
Q. Does collecting GST have any impact on my income taxes or the way I calculate income taxes? Do I report the portion of the GST that I keep as business income?
A. Yes, it would be considered a revenue item.
Q. Do I report the portion of the GST that I remit as a business expense?
A. You would deduct net GST remitted from total sales plus GST collected to determine taxable revenue.
Q. I assumed that the Quick Method meant you would save time as you would no longer have to figure out how much GST you've spent on business expenses (because you're keeping a set percentage of the GST you've collected, and that supposedly makes up for it). However, then it occurred to me that you would still need to break out the GST on all business expenses in order to be able to exclude it when you report your expenses for tax purposes. Since the Quick Method is already reimbursing you for the GST you spent, you shouldn't be including that same GST you spent when you're tallying up your business expenses.
A. You would deduct the net GST you remitted using the Quick Method from the total proceeds from sales + GST collected. You would deduct business expenses (GST included) from the figure above to determine your net income for tax purposes. If you use the Quick Method, there is no need to track GST paid on expenses (except for capital items).
Q. I teach part-time in a diploma/degree day program of a community college (or university). I want to invoice and charge GST. I am not incorporated and have been told that I have to go on payroll. This is supposedly a Revenue Canada ruling. Can I invoice and charge GST? If not, do I include my payroll income as GST-able income, or even as business income? (I have been told that I will receive a T-4 showing income tax, EI and CPP deductions.)
A. Most community colleges/universities consider this remuneration to be in the nature of employee payroll, rather than an independent contractor, and therefore subject to source deductions and not GST-able, if only to cover themselves in case CRA does a payroll audit. Whether you are incorporated or not is not relevant.
When you receive the T4 slip, you report it as personal income, not business income, and claim the EI, CPP and taxes withheld.
Q. As above, only I teach in a non-diploma night school program. I have been told that I cannot invoice as I am not incorporated. This is supposedly a Revenue Canada ruling. Can I invoice and charge GST? If not, do I include my payroll income as GST-able income, or even as business income? (I have been told that I will receive a T-4 showing income tax, EI and CPP deductions.)
A. Same as above. It has nothing to do with incorporation or not, but employee vs. independent contractor issue.
Q. I teach part-time at a college (or university). I am incorporated and invoice for my services. Should I charge GST?
A. If the college/university allows you to invoice (rather than be on payroll and receiving a T4 slip), then you would charge GST, if you are registered, and follow the normal procedures.
Q. Where can I find out more?
You can read more about GST on the Revenue Canada website:
www.cra-arc.gc.ca/tax/business/topics/gst/menu-e.html
Sole proprietors can read more here:
www.cra-arc.gc.ca/tax/business/topics/gst/soleprop/menu-e.html
Corporations can start here:
www.cra-arc.gc.ca/tax/business/topics/gst/corporation/menu-e.html
All the best with your writing craft and your freelance business.
Sam Marinucci
Marinucci and Company
Chartered Accountants
161 Frederick Street
Toronto ON M5A 4P3
416-214-1555
sam@marinucci.ca
Note: This GST FAQ has been compiled by Sam Marinucci, a chartered accountant, based on questions posed by freelance writer Paul Lima. However, the authors of this GST FAQ are not liable for any errors or omissions or for any errors or ommissions you may make when interpreting this FAQ. If you have any doubts or questions about the information presented here, please consult your bookkeeper, accountant or tax preparer. [ BACK TO TOP ]