In the realm of digital content creation, YouTube stands out as a platform that has given birth to countless influencers, educators, entertainers, and entrepreneurs. As these creators monetize their content, they often find themselves navigating the complex waters of taxation. One such aspect that Canadian YouTubers need to be aware of is the Goods and Services Tax (GST). Here’s a detailed guide on registering for GST for YouTube creators in Canada.
Understanding GST
The Goods and Services Tax (GST) is a value-added tax levied on most goods and services sold for domestic consumption. In Canada, it’s combined with the provincial sales tax in several provinces and is known as the Harmonized Sales Tax (HST). This tax is collected by businesses and remitted to the government, ensuring that the tax burden is distributed across various stages of production and distribution, rather than just the end consumer.
Who Needs to Register?
If you’re a YouTube creator in Canada and your total global revenue (from all sources, not just YouTube) exceeds $30,000 in a calendar quarter or over the last four consecutive calendar quarters, you’re required to register for GST/HST. This threshold is for individual entrepreneurs. For public service bodies, the limit is $50,000.
Why Register for GST?
Legal Requirement
Once you cross the revenue threshold of $30,000 over four consecutive quarters, it’s a legal requirement to register and collect GST/HST.
Input Tax Credits (ITCs)
Registered businesses can claim ITCs, which are credits for the GST/HST paid on purchases and expenses related to the business. This can lead to significant savings.
Voluntary Registration
Even if you haven’t reached the $30,000 threshold, you can choose to register voluntarily. This allows you to claim ITCs right from the start, which can be beneficial if you’re incurring significant startup costs.
How to Register
Online: The Canada Revenue Agency (CRA) offers an online registration process through the ‘Business Registration Online’ service.
By Phone: You can call the CRA’s Business Enquiries line at 1-800-959-5525.
By Mail or Fax: Download and fill out Form RC1, then mail or fax it to your local tax center.
After Registration
Collecting GST/HST: Once registered, you’ll need to start collecting GST/HST on taxable supplies. For YouTube creators, this could include sponsored content, merchandise sales, or direct ad revenue.
Reporting: Depending on your revenue, you’ll report and remit the collected GST/HST monthly, quarterly, or annually. Ensure timely reporting to avoid penalties.
Record Keeping: Maintain detailed records of all transactions, GST/HST collected, and ITCs claimed. These records should be kept for six years.
Special Considerations for YouTube Creators
Online content published by social media influencers, including YouTube creators, is generally considered a taxable supply. This means that if the total value of such supplies exceeds $30,000 over four consecutive calendar quarters, the influencer is required to register for the Goods and Services Tax/Harmonized Sales Tax (GST/HST). Once registered, they must collect the appropriate tax from their customers and remit it to the CRA.
Global Audience
If a significant portion of your audience is outside Canada, those revenues might be considered zero-rated, meaning you won’t charge GST/HST, but you can still claim ITCs.
Multiple Revenue Streams
Many YouTubers have diversified income sources, from Patreon to merchandise sales. Ensure you’re considering all revenue streams when calculating GST/HST.
Digital Goods
If you’re selling digital products or services, different rules might apply. It’s essential to understand how digital products are taxed in various provinces.
Example Scenario A (Provided by the CRA)
Maya: The Travel Enthusiast
Background: Maya, a 29-year-old travel enthusiast, began her journey by sharing her travel experiences on various social media platforms, including Instagram, Pinterest, and YouTube. As her online presence grew, she started monetizing her content through sponsored posts, brand promotions, and reviews of free products and services. One notable perk was an all-inclusive vacation to South America, valued at $5,000. Additionally, a fashion clothing company offered her a commission of 10% on sales generated through her promotions.
Income Tax Implications:
- Maya must report all monetary benefits, including money from posts, pictures, videos, and commissions from the clothing company.
- Non-monetary benefits, such as the free vacation valued at $5,000, must also be included in her income tax and benefit return.
GST/HST Implications:
- If Maya’s online activities surpass the $30,000 threshold over four calendar quarters and are not just personal endeavors, she must register for GST/HST.
- Once registered, Maya can claim input tax credits for the GST/HST she pays on her business purchases related to her online taxable activities.
Example Scenario B (Provided by the CRA)
Saddaf: The Online Gamer
Background: Saddaf, a 21-year-old online gamer, is known for playing football video games on platforms like Twitch and YouTube. To enhance their gaming experience, Saddaf invested in high-quality gaming equipment and a faster internet connection. This investment paid off as Saddaf’s online presence grew, leading to various income streams. These included subscription fees, commissions from merchandise sales, donations, tournament prizes, sale of pictures to sporting companies, ad revenues from YouTube, and free sporting goods.
Income Tax Implications:
- Saddaf must report all income from online activities, including:
- $4,000 in subscription fees from Twitch.
- $1,500 from beer mug sales.
- $1,400 from donations (bits from Twitch and PayPal).
- $50,000 from the football tournament win.
- $5,000 from selling pictures to sporting companies.
- $1,100 from YouTube ad revenues.
- The value of the free sporting goods, which is $900.
- Saddaf can also claim expenses related to generating this income, such as the depreciation on the computer equipment and a portion of the internet connection cost.
GST/HST Implications:
- If Saddaf’s online activities exceed the $30,000 threshold over four calendar quarters and are not just personal endeavors, they must register for GST/HST.
- Once registered, Saddaf can claim input tax credits equivalent to the GST/HST paid on purchases and expenses related to their taxable supplies.
