CRA Guidance On GST/HST For Rideshare Operators
May 16, 2022 Andrew AdolphAudits
The only sure things in life are death and taxes……
And maybe no CRA guidance on how to do your taxes as a rideshare operator. Navigating these waters can be confusing, especially if you’re just starting out, so let me clear some things up for you today in this post.
How Rideshare Drivers Are Affected By the Lack Of CRA Guidance
Since CRA guidance for rideshare operators is shall we say less than adequate; I’ll start from the beginning.
Before July 1st of 2017, rideshare operators with a gross annual income below $30,000 didn’t have to register for a business number or collect taxes. But now, according to CRA guidance, the rules have changed and rideshare operators have to charge GST/HST on their fares because they are included in the definition of “taxi businesses.”
This applies even if you earn less than $30,000 annually. That means, even if you only drive on a casual or part-time basis, as long as you fall under the definition of “taxi business”, you have to collect GST/HST.
The definition of “taxi business” used to be limited to “a business carried on in Canada of transporting passengers by taxi for fares regulated under the laws of Canada or a province”. But it has since expanded to include commercial ridesharing platforms like Uber and Lyft. Can you believe CRA guidance on this topic is almost nonexistent?
You’re probably used to seeing GST/HST billed separately on a receipt or invoice but, like in the case of buying gas, a ridesharing CRA gu driver charges with tax included in the fare. For example, if your total fare is $20, GST/HST is collected from the $20 despite your fees and expenses. GST is included in the 20$.
Do You Need To Register For a GST/HST Account?
To make sure you’re following CRA guidance, ask yourself: Are you a self-employed taxi operator? Or a commercial ridesharing driver? Then you have to register for a GST/HST account, even if you’re considered a small supplier.
If you’re not sure if you’re self-employed consider if:
- You own the vehicle you use to taxi people around.
- You lease the taxi vehicle on a daily, weekly, or monthly basis paying a flat fee.
- You lease a taxi vehicle for a percentage of fares.
How Do I Calculate My ITCs?
As an independent contractor, you can claim your GST as input tax credits (ITCs). As long as your expenses are used for business activities.
Claiming your ITCs will help you recover GST/HST that you paid on essential business costs like:
- Gas and diesel fuel.
- Vehicle leases and purchases.
- Car maintenance, repairs, and car washes.
You just need to be sure to record these purchases otherwise you will not be able to claim them.
But you can’t claim:
- Insurance or interest costs because GST/HST doesn’t apply to them.
- ITCs on the bulk of your business purchases if you decide to use to the quick method to calculate your net tax.
But you can use the simplified method to calculate your ITCs. For more info on that, click here.
How Do I Calculate My Net Tax?
As an independent contractor, you’ll have to calculate your net tax in order to file your GST/HST return. There are two ways to go about doing this: The regular method and the quick method. Need more info on filling out your GST/HST return? Click here.
The regular method involves totaling the GST/HST you collected and deducting your ITCs from that amount. Your net tax is the difference between the two amounts, including any adjustments. If you find that you collected more GST/HST than what was paid or payable by you for your business expenses, send CRA the difference. But if you find instead that you collected less GST/HST than what was paid or payable by you, you can claim a refund.
This method is only available if your annual taxable sales, including the sales made by your associates, are $400,000 or less with GST/HST included and it’s within any four consecutive fiscal quarters over the last five fiscal quarters. Fill out and submit this form to start or stop using the quick method at the beginning of your reporting period.
If you still need CRA guidance or more help on figuring out your net tax check out this page on the CRA’s site.
The better you understand taxes, the better you can control your finances and the more efficiently you can make money. Interested in learning more?
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Andrew Adolph is a CPA and former CRA auditor with 25 Years of experience. He helps businesses to not par any more in sales taxs than the law says they must and acts as an advocate for you if you are being audited, so you can fous on your business.