[Robert J. Sawyer] Science Fiction Writer
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The Business of Writing

GST Registration

by Robert J. Sawyer

First published in the May 1993 issue of Alouette: The Newsletter of the Canadian Region of SFWA

Copyright © 1993 by Robert J. Sawyer
All Rights Reserved

Canadian SF writers should think seriously about registering for the Goods and Services Tax. If, like me, you make almost all your sales to foreign markets, registering definitely makes sense: since sales outside of Canada are zero-rated (that is, you don't have to collect GST on them), registering for the GST means you'll receive a rebate check either quarterly or annually from Revenue Canada, refunding the GST you paid out on purchases related to your business. Since everything from paper clips to airline tickets for your trips to conventions has GST tacked on to it, it makes sense to get that money back. Registering for the GST is the only way to recover that money; you can't claim it in any other way as a business expense.

What if you make sales to Canadian markets? No problem: the law requires your Canadian publishers to pay you 7% GST; all you have to do is provide them with your GST registration number. Does this somehow make you less competitive, since you charge 7% more than non-registered writers? Not at all. The GST is a flow-through tax: your publisher will be registered for the GST, and will get a refund from Revenue Canada for the 7% paid to you. (A "flow-through tax" means everyone gets the tax refunded by the government except the ultimate consumer; the person who buys the book or magazine containing your work is the only one in the chain who doesn't get a refund.) Magazines such as On Spec ask for your GST registration number right on their contracts.

Let's look at a hypothetical case. Say in the first three months of this year you sell a novel to Bantam for US$10,000, half of which is due on signing; you also sell a short story to On Spec for $100; you spent $300 on office supplies, books, and postage; and you took a trip to Canvention in Nova Scotia, which, all told, cost you $1,200.

The GST tax return (which you can choose to file quarterly or annually; more about that below) asks you four simple questions:

  1. How much money did you make during the reporting period? Answer for our example: $6510 (US$5000 converted to Canadian dollars at the current exchange rate of .78, plus $100 for the On Spec sale.)

  2. How much GST did you collect? Answer: $7 (7% on top of the sale price to On Spec; remember the sale to the American publisher is zero-rated, and no tax is collected on it).

  3. How much money did you spend on business expenses? Answer: $1,500 (the $1,200 for your trip plus the $300 for your other business-related purchases).

  4. How much GST did you pay our on those expenses? Answer: $105 (which is 7% of $1,500).

Finally, you subtract the amount of GST paid out ($105 in our example) from the amount you collected ($7). If the answer is a positive number, you send Revenue Canada that amount. If the answer is a negative number, Revenue Canada will send you a cheque for that amount. In our example, you'd receive a cheque for $97, money that would have been lost if you were not a GST registrant.

The government offers a couple of options for GST filers. First, for small businesses (such as writing), instead of actually calculating how much GST you paid out on business expenses, you can instead use the "quick filing" method: you collect 7% GST on your sales in Canada, but pay only about 5% of it back to the government. The difference, about 2%, is supposed to compensate you for the GST you paid out on business-related purchases.

I don't recommend using the Quick Method. If we'd used it for our example, we'd have had to send Revenue Canada a cheque for $5, pocketing $2 out of the $7 of GST collected from On Spec. In other words, you'd have lost $103 (almost all of the GST you spent on business purchases). The Quick Method is only potentially a good deal if almost all of your self-employment income is from Canadian sources (and, therefore, you take in a lot of GST).

Your other option is quarterly vs. annual filing (this is a new option, introduced in January 1993). Filing quarterly means you get your refund more quickly. Filing annually means you only have to fill out one GST tax form a year, instead of four. As Edo van Belkom would say, take your pick.

What about capital expenses? If you buy a computer for $1,700, you'd pay $119 in GST. Even though you have to depreciate the computer on your income tax return (it's what Revenue Canada calls a "class-10" item, and depreciates at 30% per year), you can claim back 100% of the GST immediately. (This is true regardless of whether you use standard filing or the Quick Method — under both systems you can immediately claim the full GST back for capital purchases.)

Of course, I recommend you discuss matters with your accountant before making any decisions. Still, I find the GST a lot easier to take knowing that I'm going to get it back whenever I buy a book or a magazine or a piece of software or a bookcase or . . .

Note: Revenue Canada recently tried to discourage one Canadian SFWAn from registering for the GST. The reason was obvious: the government didn't want to have to send this person refund cheques after every reporting period. It is your right to be a GST registrant; Revenue Canada has no discretion in this matter.

To request GST registration forms, call the Revenue Canada Excise office in your city. Also ask for a copy of the booklet GST Information for the Arts and Entertainment Industry.

  • BC (all cities): (800) 561-6690
  • Calgary: (800) 661-3498
  • Edmonton: (800) 661-0005
  • Toronto: (416) 954-0514
  • Ottawa: (800) 465-6160
  • Montreal: (800) 361-8339

Robert J. Sawyer has written about personal finance for The Financial Times of Canada, Report on Business Magazine, and Your Money.

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