Input tax credit, explained
Registration turns the GST/HST on your costs into money you get back. A registered shop claims ITCs on purchases and expenses used in its commercial activity: chair rent, clippers and product for resale, booking software, utilities, the accountant, and the business share of a phone or a home office. Personal purchases and club memberships are out, and most registrants have four years to claim a missed credit. In Quebec the same claim on the QST is an input tax refund, an ITR.
The receipt has to carry enough detail, and the thresholds changed in 2021. Under $100 the CRA needs the supplier’s name, the date and the total; from $100 to $499.99 it also needs the GST/HST amount or a tax-included note and the supplier’s registration number; at $500 and over it needs the buyer’s name, a description and the terms too. The CRA confirmed in Excise and GST/HST News No. 118 that the old $30 and $150 tiers were replaced by $100 and $500 effective April 20, 2021.
The mistake shops make most is staying under the small supplier threshold to avoid collecting tax and giving up the credits with it. A shop paying $1,500 a month of taxable rent, product and software in Ontario is leaving about $195 a month of HST unclaimed. The second mistake is a drawer of receipts with no registration numbers on them, which the CRA can refuse on audit.
BarberFlow handles the collected side of the return: GST/HST, PST and QST are configured per location and recorded on every payment, and the payments export by date range gives the accountant the tax collected for the period. The credit side comes from the shop’s own receipts, so keep the ones with a registration number on them.
See AccountingFrequently asked questions
What can a barber claim as an input tax credit?
The GST/HST on purchases used in the business: chair or shop rent, tools and product for resale, booking software, utilities, professional fees and the business share of a phone or home office. Personal expenses and club memberships are excluded.
Do I need a receipt with the HST number to claim an ITC?
For any purchase of $100 or more, yes: the receipt must show the supplier’s GST/HST registration number and the tax amount or a tax-included note. Under $100 the supplier name, date and total are enough. The tiers moved from $30 and $150 to $100 and $500 on April 20, 2021.
Can a booth renter claim ITCs on chair rent?
Yes, if the renter is registered for GST/HST and the shop charged tax on the rent. The renter claims the tax paid on rent against the tax collected on their own haircuts.
