What Happens If Your Charity Doesn't Register for GST in Canada?

When a charity in Canada fails to register for GST/HST after exceeding the required threshold, it faces serious financial and legal consequences. Many charities don't realize they need to register once their revenue hits $250,000 in any 12-month period.

This often leads to costly mistakes down the road. The Canada Revenue Agency can require charities to pay the GST/HST they should have collected, even if they never charged it.

Charities may also face penalties and interest on the unpaid amounts. This means a charity could end up paying thousands of dollars out of pocket for taxes they never collected from their donations and taxable sales.

Knowing when registration is required helps charity leaders avoid these expensive problems. The consequences affect cash flow, compliance status, and the financial health of the organization.

When GST/HST Registration Is Required

Charities and nonprofits in Canada must register for GST/HST once they meet specific revenue thresholds set by the Canada Revenue Agency. Some charities can choose to register early to claim tax benefits before reaching these requirements.

Mandatory Registration Thresholds

Charities must register for GST/HST when their taxable sales reach $250,000 within any two consecutive calendar quarters. This threshold is higher than the $30,000 limit that applies to regular businesses.

The CRA tracks this amount across any consecutive quarters. Once a charity crosses this limit, it has 30 days to register and obtain a business number for GST/HST purposes.

After registration, charities must charge GST/HST on all taxable sales (not donations) and file regular GST/HST returns. They must also remit collected taxes to the CRA.

GST rates by province:

• Most provinces: 5% GST only
• Ontario, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador: 13-15% HST
• British Columbia: 12% HST

Small Supplier Criteria for Charities

Charities with less than $250,000 in annual taxable sales qualify as small suppliers. These charities are not required to register for GST/HST.

Small supplier charities cannot charge GST/HST to customers or claim Input Tax Credits (ITCs) on organizational expenses. This status continues until taxable sales exceed $250,000 in any two consecutive quarters.

Once this happens, the charity must register within 30 days.

Important note: Donations to registered charities are not considered taxable sales. Only revenue from commercial activities, such as selling goods or services, counts toward the threshold.

Voluntary Registration and Early Registration Benefits

Charities can register for GST/HST before reaching the $250,000 threshold. Voluntary registration offers several advantages for growing organizations.

Key benefits include:

• Claiming ITCs on all organizational expenses
• Recovering GST/HST paid on equipment and supplies
• Appearing more established to donors and funders
• Preparing for future growth and commercial activities

Voluntary registration is helpful for charities with high operational costs or social enterprises. Many charities spend money on equipment, program supplies, and other expenses before generating significant taxable revenue.

By registering early, they can claim back the GST/HST paid on these purchases. This creates immediate cash flow benefits, especially when charities are building new programs or social enterprises.

Want to understand how GST/HST rules apply to non-profits? Learn more in our guide: Tax Exemptions & GST/HST for Non-Profit Organizations in Canada.

Consequences of Not Registering for GST/HST

Charities that fail to register for GST/HST when required face serious financial and legal consequences from the Canada Revenue Agency. These range from owing back taxes to facing penalties and losing valuable tax credits.

Tax Liability for Uncollected GST/HST

When a charity should have registered for GST/HST but didn't, they still owe the tax to the CRA even though they never collected it from customers. The CRA considers the charity liable for all GST/HST that should have been charged during the period of non-compliance.

This creates a significant financial burden. The charity must pay the full tax amount out of its own funds—funds that could have supported programs and beneficiaries.

Key tax liability points:

• Tax owed on all taxable supplies made during non-registration period
• No ability to collect retroactively from customers or clients
• Charity absorbs the full cost of uncollected GST/HST
• Liability begins from the date registration was required

The CRA can assess these amounts going back several years. This often results in substantial unexpected tax bills that can devastate a charity's budget.

Penalties and Interest Imposed by CRA

The CRA imposes strict penalties for failing to register when required. These penalties add to the financial impact beyond just the uncollected taxes.

Penalty structure includes:

• Failure to register penalty: $1,000 minimum
• Late filing penalties: Up to $500 per missed GST/HST return
• Interest charges: Compound daily on all outstanding amounts
• Gross negligence penalty: Up to 50% of tax owed in severe cases

Interest starts accumulating from the date the tax should have been remitted. The CRA's interest rates change quarterly and compound daily, making delays increasingly expensive.

Repeated non-compliance can trigger additional administrative penalties. The CRA may also restrict certain activities until compliance is achieved, potentially affecting the charity's registered status.

Ineligibility for Input Tax Credits

Unregistered charities cannot claim input tax credits on their purchases, even after they register. This means they pay GST/HST on all organizational expenses without any recovery.

The loss of ITCs increases operating costs significantly. Charities pay the full GST/HST rate on everything from office supplies to program equipment.

ITC restrictions affect:

• All purchases made before registration
• Professional services and consulting fees
• Equipment and asset purchases
• Program supplies and operating expenses

Once registered, charities can only claim input tax credits going forward. They cannot recover GST/HST paid on purchases made during the non-registration period.

This creates a permanent cost disadvantage that diverts funds away from the charity's mission and programs.

Risk of CRA Audits

The CRA actively monitors charity activities to identify unregistered entities that should be collecting GST/HST. Their detection methods are increasingly sophisticated.

CRA audit triggers include:

• Cross-referencing supplier records with unregistered charities
• Revenue threshold monitoring through T3010 filings
• Sector-specific compliance reviews
• Complaint investigations from clients or competitors

Audits can extend back several years and involve detailed examination of charity records. The CRA has broad powers to request documentation and conduct interviews with staff and board members.

Charities under audit face significant time and resource costs—resources that should be dedicated to their charitable mission. They must provide detailed records while potentially facing all the financial consequences listed above.

Impact on Charity Operations and Financials

Not registering for GST/HST when required creates significant operational challenges. Charities face damaged relationships with funders and clients, complex financial management issues, and restricted cash flow.

Loss of Credibility and Donor Trust

Charities without proper GST/HST registration face credibility issues with their stakeholders. Many funders, government agencies, and corporate partners expect legitimate charities to have proper tax registration when conducting commercial activities.

Organizational clients often refuse to work with unregistered charities because they cannot claim input tax credits. This creates a competitive disadvantage when charities operate social enterprises or fee-for-service programs.

Government funders and corporate sponsors often require GST/HST registration as part of their due diligence process. Without proper registration, charities may lose access to significant funding opportunities.

The lack of compliance also signals to potential donors and partners that the charity may not have strong financial management practices. This perception can damage the organization's reputation and make it harder to attract support.

Record-Keeping and Accounting Challenges

Operating without GST/HST registration creates complex accounting problems. Charities must still track all taxable sales to determine when they exceed the $250,000 threshold.

When charities finally register, they face retroactive compliance requirements that demand detailed records of past transactions. The CRA may require charities to remit GST/HST on sales made before registration.

Accounting systems become more complicated to implement later. Charities that delay registration often lack proper invoicing systems for their commercial activities, leading to manual errors and inconsistent pricing.

The transition period creates additional administrative burden on already-stretched charity staff. Organizations must update their invoicing, adjust pricing for programs and services, and potentially bill existing clients for previously uncollected taxes.

Cash Flow Implications

Delayed GST/HST registration creates immediate cash flow problems when charities must pay taxes they never collected from customers. The CRA requires payment of GST/HST on past sales regardless of whether it was charged to clients.

Charities face penalties and interest charges on unremitted taxes, which compound daily until resolved. These additional costs can strain already tight budgets and divert funds from programs.

Input tax credits become available only after registration. Charities cannot recover GST/HST paid on expenses before this date, representing a permanent loss of funds.

The sudden need to collect and remit GST/HST also requires charities to adjust their pricing and cash flow projections. Many must absorb the tax initially while transitioning clients to new pricing structures that include GST/HST, further straining limited resources.

Exceptions and Charities Exempt from GST/HST Registration

Not all charities in Canada must register for GST/HST, even if they exceed the $250,000 small supplier threshold. Certain charities that provide only exempt supplies may qualify for exceptions under specific conditions.

Exempt Supplies and Charity-Specific Rules

Charities that provide only exempt supplies generally cannot register for GST/HST. For charities, these exempt supplies commonly include:

• Donation revenue (not subject to GST/HST)
• Membership fees for clubs and associations
• Educational services provided by qualifying institutions
• Health care services
• Subsidized meal programs
• Certain cultural and recreational programs

However, many charities also engage in commercial activities that generate taxable revenue, such as:

• Selling goods or merchandise
• Charging market rates for services
• Operating social enterprises
• Renting commercial space
• Providing consulting or training services

Only the taxable revenue counts toward the $250,000 registration threshold. Charities must carefully track which activities generate taxable versus exempt supplies.

Special Rules for Social Enterprises and Revenue-Generating Activities

Charities operating social enterprises receive special attention under GST/HST rules. These revenue-generating activities often cross the line from charitable programs into commercial operations.

Social enterprises that sell goods or services at market rates must track their revenue carefully. Once taxable sales exceed the $250,000 threshold over two consecutive quarters, registration becomes mandatory.

Charities should separate their accounting for charitable programs and commercial activities. This helps determine GST/HST obligations accurately and ensures proper compliance.

Organizations offering both free charitable services and fee-based programs must only count the fee-based revenue toward the threshold. However, all taxable sales must be tracked once registered.

How to Correct Late or Missed GST/HST Registration

Charity leaders who missed their GST/HST registration deadline have several options to fix the situation. The CRA offers ways to register retroactively, and tax professionals specializing in charity accounting can help navigate the process to minimize penalties and interest charges.

Voluntary Disclosure Program

The Voluntary Disclosure Program (VDP) lets charities come forward before the CRA discovers their non-compliance. This program offers protection against penalties and can reduce interest charges.

To qualify for VDP relief, the disclosure must be voluntary and complete. The charity cannot wait until after the CRA contacts them about missing registration.

Key VDP benefits include:

• Complete penalty relief on unpaid taxes
• Interest relief up to 75% for unprompted disclosures
• Protection from prosecution
• Opportunity to correct multiple tax periods at once

The charity must file all missing GST/HST returns as part of the disclosure. They still owe the full tax amount but avoid harsh penalties.

Charity leaders should act quickly once they realize the mistake. The longer they wait, the more likely the CRA will discover the issue first.

Retroactive Registration and Remittance

Charities can request retroactive registration directly from the CRA without using the VDP. This works when the registration delay is short and no other compliance issues exist.

The CRA typically approves backdating for up to 30 days automatically. Longer periods require strong supporting evidence.

Required documentation includes:

• Sales invoices showing dates and amounts
• Bank statements matching revenue deposits
• Contracts or agreements with service dates
• Expense receipts for input tax credit calculations
• T3010 returns showing revenue sources

The charity must calculate GST/HST owed from the effective registration date. This includes tax on all taxable supplies, even if GST/HST was not charged to clients.

They can claim input tax credits for organizational expenses during the retroactive period. However, credits have time limits and may not cover the full tax liability.

Once approved, the charity must file returns for all backdated periods and pay any net tax owing.

Consulting a Charity Tax Professional

Tax professionals specializing in charity accounting help organizations navigate the rules around late GST/HST registration. They can determine the best approach based on the charity's specific circumstances.

A qualified charity accountant or tax lawyer can prepare the voluntary disclosure or retroactive registration request. They ensure all required documentation is included and properly presented to the CRA.

Professional services include:

• Calculating exact registration dates based on the $250,000 threshold
• Preparing missing GST/HST returns
• Negotiating payment arrangements with the CRA
• Representing the charity in communications with tax authorities
• Ensuring charitable registration status isn't affected

Tax professionals who work with charities understand which option provides the best outcome. They can often secure better interest relief and avoid mistakes that delay the process or jeopardize the charity's status.

The cost of professional help is usually less than the penalties and interest saved. Many charity accountants specialize in GST/HST compliance and have established relationships with CRA officials.

Best Practices for GST/HST Compliance

Successful GST/HST management requires careful tracking of all taxable transactions. Meeting CRA deadlines consistently helps charities avoid penalties and maintain good standing.

Tracking Taxable Sales and Obligations

Charities must monitor their taxable revenue to identify when GST/HST registration becomes mandatory. The $250,000 threshold applies to taxable sales over two consecutive calendar quarters.

Key tracking requirements include:

• Recording all revenue transactions with dates and amounts
• Separating taxable sales from donation revenue
• Distinguishing between exempt and taxable supplies
• Maintaining proper documentation for all commercial activities
• Documenting input tax credits on organizational purchases

Charities should use accounting software designed for nonprofits to automate these calculations. This reduces human error and ensures accurate tax collection.

Organizations must charge the correct GST/HST rate based on where clients receive goods or services. Provincial rates vary across Canada.

Monthly revenue tracking helps charities:

• Identify approaching thresholds early
• Plan for registration requirements
• Avoid unexpected tax liabilities
• Maintain financial transparency for boards and funders

Timely Filing of GST/HST Returns

Registered charities must file GST/HST returns according to their assigned filing frequency. The CRA determines this based on annual taxable sales amounts.

Filing schedules are:

• Annual: Taxable sales under $1.5 million
• Quarterly: Taxable sales between $1.5-6 million
• Monthly: Taxable sales over $6 million

Returns must be filed and payments submitted by specific deadlines. Late filing triggers automatic penalties and interest charges from the CRA.

Charities should remit collected GST/HST promptly. This tax money belongs to the government and must be available when returns are due.

Electronic filing through the CRA's online portal speeds up processing and provides confirmation receipts. This creates an audit trail for compliance purposes and board reporting.

Conclusion

Not registering for GST/HST when required leads to serious financial penalties and complications with the Canada Revenue Agency. Charity leaders face interest charges, retroactive tax collection, and potential damage to donor and funder relationships when forced to address missed taxes.

The $250,000 threshold rule is clear for charities. Once an organization's taxable sales cross this revenue mark over two consecutive quarters, registration must happen within 30 days.

Keeping accurate financial records helps charities track their revenue sources and avoid unexpected registration requirements. Distinguishing between donation revenue and taxable sales is crucial for proper compliance.

B&H Charity Accounting Firm helps Canadian charities and nonprofits navigate GST/HST registration requirements and stay compliant with CRA regulations. Our experienced team can assess your organization's situation and provide guidance on registration timing, exempt versus taxable supplies, and social enterprise accounting.

Contact us at (289) 301-8883 or visit charityaccountingfirm.ca to schedule your free consultation and protect your charity from costly penalties.

Frequently Asked Questions

Charity leaders who miss GST/HST registration face penalties, lost tax credits, and potential legal action from the CRA. The consequences range from $250 fines to criminal charges depending on the severity and duration of non-compliance.

What happens if your charity doesn't register for GST in Canada?

Charities that fail to register for GST/HST when required face immediate financial penalties. The CRA can impose fines and deny the organization access to Input Tax Credits on expenses.

The charity cannot legally charge GST/HST to clients without proper registration. This creates a disadvantage compared to registered organizations offering similar services.

The CRA may deem that the charity collected GST/HST from clients even when they didn't charge it. This means the charity still owes the tax amount to the government based on their total taxable sales.

What happens if GST is not registered?

Unregistered charities lose the ability to claim Input Tax Credits on organizational expenses. This results in higher operating costs since they cannot recover GST/HST paid on supplies and equipment.

The charity faces accumulating penalties for each quarter they remain unregistered past the $250,000 threshold. Late registration penalties compound over time, creating larger debt obligations that drain resources from programs.

Legal consequences can include prosecution under tax evasion laws. The CRA treats failure to register as a serious violation of tax obligations, which can also affect the charity's registered charitable status.

What are the consequences of filing GST late?

Late GST/HST filing triggers an automatic penalty of $250 when the CRA issues a demand to file. Additional penalties apply for incorrect or incomplete returns submitted after the deadline.

Interest charges accrue on any unpaid GST/HST amounts from the original due date. These charges continue to compound until the charity pays the full amount owing.

Repeated late filing can result in the CRA requiring more frequent filing periods. The agency may also conduct audits of charities with poor compliance records, diverting staff time from the organization's mission.

What is the penalty for not paying GST?

Unpaid GST/HST incurs interest charges at rates set by the CRA. The interest compounds daily on the outstanding balance until full payment occurs.

The CRA can take collection actions including garnishing bank accounts and seizing organizational assets. They may also place liens on property owned by the charity.

Criminal charges can result from willful tax evasion. Penalties range from $1,000 to $25,000 in fines plus up to one year in prison for deliberate non-compliance. This can also jeopardize the charity's registered status.

Is it mandatory for charities to pay GST?

GST/HST registration becomes mandatory when a charity reaches $250,000 in taxable sales within two consecutive calendar quarters. This threshold applies to commercial activities, not donation revenue.

Charities below the threshold can voluntarily register for GST/HST. Once registered, they must charge GST/HST on taxable sales and file regular returns regardless of their revenue level.

Certain revenue sources like donations, many membership fees, and some program fees may be exempt from GST/HST. Charities must carefully track which activities generate taxable versus exempt revenue.

What happens if a charity doesn't reply to a GST notice?

Ignoring CRA notices leads to automatic assessments based on the agency's estimates. These assessments usually exceed the actual amount owed and include maximum penalties.

The CRA can begin collection actions without further notice. This may include freezing bank accounts, garnishing revenue, or seizing organizational assets—actions that can severely disrupt operations and program delivery.

Legal consequences can escalate if charities do not respond to official notices. The CRA may pursue criminal charges for tax evasion in cases of deliberate non-compliance, and the charity's registered charitable status could be at risk.