Business Number vs. GST Number: What’s the Difference?

When starting a new business in Alberta, there is often confusion about the difference between a business number vs. GST number. These registrations serve different purposes, so it’s important to understand the key differences and when they’re required.

What is a business number?

A business number is a 9-digit registration number issued by the Canada Revenue Agency (CRA) that identifies your business for tax purposes. This number stays with your business for life and is used for tax registrations like GST and corporate income tax.

Does a corporation require a business number?

When you incorporate your business federally or provincially in Alberta, a business number is automatically assigned.

Does a sole proprietor require a business number?

Businesses registering as sole proprietors are not required to immediately get a business number. Rather, they only need to obtain one when registering for CRA program accounts like GST, payroll, etc. They will also need a GST number if they are required to register for GST (discussed below). We normally recommend obtaining a business number right away to avoid future delays when setting up other CRA accounts.

What is a GST number?

Whether you are operating your business as a sole proprietor, or through a corporation, a GST number is connected to and based on the business number. In other words, you cannot obtain a GST number without first having a valid business number registered with the Canada Revenue Agency (CRA).

The GST number will simply be your business number, plus a 4-character extension unique to GST (usually RT0001). For example, 123456789 RT0001.

Even though it is connected to your business number, you still need to register separately for a GST number in order for it to be active.

What is a GST number for?

Having a GST number allows your business to charge and collect the Goods and Services Tax (GST) on the sale of goods and services. Its purpose is to allow for the collection of GST on the sale of goods and services in Canada.

When should I register for GST?

There are several different factors that determine whether a business must register for GST, but the primary factor is whether your business is considered a “small supplier” by the CRA. Generally, small suppliers earn less than $30,000 in gross income during any 12-month period. If you are not a “small supplier”, then you will likely be required to apply for a GST account and charge your customers GST on their purchases.

Even if GST registration is not required, it may still make sense to apply. There can be benefits to voluntarily registering even if you are under the threshold. This is because registering for GST can allow you to claim input tax credits to recover the GST paid on business expenses. It can also help your business to appear more credible to its clients or customers. The main drawback is the requirement to file GST returns along with your corporate tax return.

Because there are several factors that go into whether a GST number is required or desirable for your situation, we recommend consulting with the CRA’s website before proceeding. The information can be a bit confusing, so if possible, we also recommend consulting with your tax or accounting advisor before proceeding.

Summary

• A business number identifies your business to the CRA and is needed for tax registrations, while a GST number allows for charging GST. Understanding the difference between a business number vs. GST number is key.
• Sole proprietors don’t need a business number right away – only when registering for certain CRA accounts.
• There are pros and cons to voluntary GST registration. Consult an accountant to determine if it is right for your business situation.
• If you are considering incorporating your Alberta business, feel free to contact us for advice on the process and benefits.