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The HST Dilemma
You’re in one province, the person who hired you is in another. You’re Zooming sixty unknown faces, and you have no idea which province any of them lives in. How do you know which sales tax rate to charge in the working-from-home era?
A big question that arises for folks who collect GST/HST comes down to invoicing: when you do charge GST? Or is it supposed to be HST? Why do I have a customer asking me not to charge sales tax?
(Looking for a general discussion of GST and HST? Like…when and how you’re supposed to register to collect it? Check out the GST and HST page on ArtistProducerResource.com.)
Place of Supply
This can be a funny rule to wrap your head around—made even more complicated by the fact that we’re now all working in the digital world, with many clients and customers farther away from us than ever before (while we ourselves stay closer to home than ever before...three cheers for #PandemicLife).
CRA uses the term “place of supply” when determining which rate of sales tax to charge. This means that you charge the GST or HST rate based on the location where you are supplying your product or service. So you may be handcrafting that macramé in your basement suite in Toronto, or hosting that Zoom consultation from your home office in Vancouver, but what counts is where your product or service is being consumed.
An easier way to think of it is: where are you sending your invoice (i.e. what is the business address of the person who’s paying you)? If you’re invoicing a company located in Quebec, you charge the 5% GST in place in that province. Sending your product to a customer in New Brunswick? You charge them New Brunswick’s 15% harmonized sales tax. (See below for a table of which rates to charge in what province.) If you have an out-of-province client telling you not to include sales tax on your invoice, they’ve got that wrong: if you are registered to collect GST/HST, you need to do so, you just need to insure you’re charging the correct rate according to the province of supply. As detailed in the table below, the only instance in which you would not charge sales tax is if you’re invoicing internationally.
A helpful way to understand the “place of supply” rule is to think back to that fabled time when we could all gather together. (You know, back when we used to physically go places to experience a performance?) If an Alberta resident purchased a ticket to see a play at Tarragon Theatre, they’d pay 13% HST on that ticket because Tarragon is located in Ontario—not 5% because the person purchasing the ticket is visiting from Alberta.
The Complicating Factor
What makes things tricky in the online world is that now, thanks to *official pandemic sponsor* Zoom, we’re able to host events and invite people into our space—whether it’s for online classes, workshops, or performances—and those people could be consuming what we’re offering from pretty much any location. You’re unlikely to be gathering your meeting guests’ mailing addresses and sending them individual invoices, so in this kind of scenario, CRA states that you would charge the sales tax rate of where you are located. However, if you are hosting a one-on-one session with someone, like a vocal lesson, you would charge sales tax based on the location of that individual (e.g. if you’re based in Newfoundland and offering a vocal lesson to someone in Toronto over Zoom, you charge Ontario’s 13% HST).
The first question to ask yourself is whether you’re sending an invoice for your service or product—and if you are, easy, just follow the Place of Supply rules. For example, if a company in Manitoba is paying you to host a workshop for 50 people on Zoom who could be tuning in from wherever, you charge Manitoba’s 5% GST—you are getting paid by one person/company whose business address is in Manitoba (rather than getting paid individually by workshop registrants), and that trumps the fact that the Zoom participants are located from all over.
For more information and examples from the CRA, check out:
GST/HST Rates Across Canada
The rate for taxable supplies depends on the province or territory. As of February 10, 2021, the rates are:
Got Questions?
If you are a performing artist working in Canada and have further questions, please contact us by emailing info@generatorto.com and we will consult with you at our next Financial Joy Office Hours session. Please note that at this time we are not able to offer support to folks working outside the performing arts.
Learning Pathway: Tax Season
For our second ArtistProducerResource.com Learning Pathway, Financial Literacy Consultant Audrey Quinn offers a step-by-step approach to tackling the most wonderful time of the year…tax season.
For our second ArtistProducerResource.com Learning Pathway, we’re ringing in the most *wonderful* time of the year! The time of year when you’re looking through pockets, drawers, and in between couch cushions for receipts. When you’re trying to figure out what that deposit in your bank account back in June was from. When you’re wondering if that dinner you went to with that touring company last January is deductible. Yes: it’s tax time. Maybe you started 2020 with the best of intentions, swore you’d stay on top of your finances all year long, but then life happened (and a certain pandemic happened, too). So now you’re sitting in front of a pile of papers faced with what feels like one very complicated tax return.
One Step At A Time
Step 1
Don’t fret. It may seem overwhelming at first, but if you take a systematic approach and break tax prep into smaller steps, it will feel more manageable.
Step 2
Familiarize yourself with the Canadian tax system and your obligations as a tax payer by reviewing the Income Tax page on ArtistProducerResource.com.
Step 3
Identify all the income you earned during the tax year (in this case, January 1, 2020-December 31, 2020). This may mean gathering together invoices you sent out, service contracts you signed, and records of deposits. You will also have to report any income that was reported to CRA in the form of T4s, T4As, T3s or T5s. By February 28, you should be able to see all applicable forms issued to you via CRA MyAccount.
Step 4
Organize all expenses related to your self-employment by type of expense—think office supplies, union dues, agent fees, home office materials, business meals, etc.
Step 5
Don’t forget about tax deductions that are available to all Canadians, regardless of self-employment status. (These include Medical, Donations, RRSP Contributions, Ontario rent credits.)
Step 6
If you’re feeling confident, you can prepare your tax returns using any CRA-approved tax filing software, or you can book an appointment with a tax professional. Make sure you’re up front when booking a tax appointment that you are a self-employed artist and that the tax preparer is familiar with your line of work. Not all tax preparers are created equal and it’s up to you to advocate for your needs.
Step 7
If you’ve decided to have your taxes done by a tax professional, be sure to review Artbooks’ “Prepare to Meet your Tax Preparer” guide before your appointment to make sure you have everything you need to make that session run smoothly.
Things to Consider
Grant Income
One aspect of personal income tax that is unique to artists is the receipt of grants. Grants are a welcome source of revenue for artists but can create quite a tax headache. Our Guide to Government Grants and Their Tax Treatments will help you with preparing your taxes after receiving a grant.
Employment Status
Unsure whether you should be (or might want to be) considered an employee rather than a contractor, or vice versa? Visit Employee vs. Contractor on ArtistProducerResource.com to learn the differences between the two (there are pros, cons, and tax implications for each).
Planning Ahead
Once you’ve climbed the tax prep mountain and emerged on the other side, it might be a good time to double down on a commitment to get/stay on top of your finances going forward. This will help you feel less overwhelmed next tax season, and will help avoid any nasty surprises—tax bills can be scary if you’re not prepared for them.
We recommend you take a hard look at your finances and plan a budget for yourself by checking out the tools and templates for Personal Finances and Planning on ArtistProducerResource.com. You might also be inspired to revamp your invoice template (which can be found on the Income Tax page) to make next tax season that much more bearable.
Keep Learning
Congratulations on wading into the murky waters of taxes as an independent artist. Your financial learning may have taken the backseat to your artistic learning in years past, but there’s no time like the present—we’re glad to see you here now! And remember, you’re not alone, and there’s lots of help around. There are plenty of further learning and development opportunities to help you with budgeting and personal finance. Some of our favourites are: Rags to Reasonable, Ambitious Adulting, and The New School of Finance.
About ArtistProducerResource.com
ArtistProducerResource.com is a free, searchable online encyclopedia of information, resources, tools, and templates for producing independent performance work in Canada, currently with a focus on Toronto. Launched in November 2017, it has since been visited by over 10,000 users, transforming the way artists producers access information and share knowledge across Canada. ArtistProduceResource.com is free to access and always will be. You can become a supporter by subscribing to our Patreon—we’ll send you a monthly newsletter with highlights, features, and all the newest content on the site. Got a suggestion for ArtistProducerResource.com? Send it to us here.
Resource Round-up: Financial Literacy
A collection of our favourite financial resources. Explore categories for artists, producers and non-profit workers, and tax season.
We’ve pulled together the best of ArtistProducerResource.com, our blog, and our favourite external resources to help you navigate finances as an artist, producer, nonprofit worker, and/or human who wants to be ready for tax season for once.
These resources will also be available via Toronto Fringe’s Next Stage Community Booster Self-Care Hub (access is pay-what-you-can) from January 21-31, 2021.
A Guide to Preparing Your Taxes After Receiving a Grant
There are many theories on how to deal with your grant when it comes to tax time, not all of which are helpful. The most important thing to remember is that grants awarded to individual artists are taxable income to the recipient.
Receiving a grant is usually considered a great event; an occasion to break out the champagne and reward yourself, a moment to reflect that a group of your peers deemed you worthy and part of the community. Grants keep art afloat in Canada, and should be a cause for celebration. Until it’s time to do your taxes, and then the world seems to fall apart and you curse the day you received that $7,000 from the Canada Council for the Arts.
There are many theories on how to deal with your grant when it comes to tax time, not all of which are helpful. The most important thing to remember is that grants awarded to individual artists are taxable income to the recipient. A T4A is issued to the recipient and reported to the Canada Revenue agency (CRA), who will expect that income to be reported.
Government Grants and Their Tax Treatments: A Guide to Preparing Your Taxes After Receiving a Grant was created by Tova Epp, with graphic design by Kinnon Elliott.