GST/HST on selling business assets in Canada can apply even when the sale is a one-time event. If a registered sole proprietor sells a business laptop, camera, tools, furniture, inventory, or another asset used in commercial activity, the sale is generally taxable. The treatment depends on what you sell, how you used it, and whether you sell individual assets or a functioning business.
GST/HST on selling business assets in Canada: the basic rule
A GST/HST registrant generally charges tax when selling property used in a taxable commercial activity. Apply the rate determined by the normal place-of-supply rules and report the tax on the GST/HST return covering the sale. This can apply even if selling equipment is not your usual line of work.
For example, an Ontario freelance videographer who is registered and sells a business camera locally for $2,000 would generally invoice $2,000 plus $260 HST. The buyer's status does not remove the seller's collection duty. A registered business buyer may be able to claim an input tax credit if the camera is acquired for commercial activity and the invoice supports the claim. Review the documentation rules in our guide to GST/HST input tax credits.
What if you are not registered?
A small supplier who has not registered generally does not collect GST/HST on an ordinary sale of used business equipment. Special rules can apply to real property and certain other transactions, so do not extend that shortcut to a commercial building or land without professional advice.
Registration status on the sale date matters. Do not cancel an account before disposing of assets simply to avoid tax: ceasing to be a registrant can itself trigger deemed-sale rules for property still held. Our guide on how to cancel a GST/HST account explains the final-return issue.
Does an asset sale count toward the $30,000 threshold?
The proceeds from selling capital property are generally excluded when you calculate whether you are a small supplier. Capital property is property you normally keep to earn income rather than sell to customers: a work computer, camera, desk, or machinery may fit that description. Selling a $12,000 piece of equipment therefore does not automatically add $12,000 to your small-supplier calculation.
Inventory is different. Goods held for sale in the ordinary course of business are not capital property, so those taxable sales generally remain part of your taxable supplies. Classification matters more than the size or frequency of the payment. Learn how the measurement period works in our guide to the $30,000 GST/HST threshold.
Selling a whole business is different
When a buyer acquires all or substantially all of the property needed to carry on a business, the parties may qualify for the section 167 election, commonly made on Form GST44. If its conditions are met, GST/HST is generally not payable on the transferred business property covered by the election. “All or substantially all” is generally understood as 90% or more of the necessary property, not simply 90% of the price.
This is not an election for selling one laptop, a client list by itself, or a few surplus tools. The buyer must acquire enough property to be capable of carrying on the business or an identifiable part of it. Eligibility also depends on the parties' registration status and the assets involved. The buyer generally files the jointly completed election by the due date of the return for the period that includes the acquisition. Get the purchase agreement and GST44 reviewed before closing, especially where real property is included.
Record the sale properly
Keep a file showing:
- The asset description, sale date, purchaser, and agreed price
- Whether the item was capital property or inventory
- The GST/HST rate and amount charged, if any
- Original purchase records and any input tax credit claimed
- The sale agreement and GST44 election for a business transfer
Also separate the asset sale from ordinary operating revenue in your books. It may have GST/HST consequences even when excluded from the small-supplier test, and it can create separate income-tax consequences such as recapture or a capital gain.
Keep your threshold total clean
Track ordinary taxable sales and inventory sales in the correct rolling period, but flag capital-property proceeds separately instead of blindly adding every deposit to the $30,000 total. HST Hero is a free Canadian GST/HST threshold tracker that helps freelancers and sole proprietors monitor taxable revenue without treating every bank deposit as the same kind of sale.
The bottom line
Registered businesses generally charge GST/HST on individual business assets sold from commercial activity. Capital-property proceeds are generally left out of the small-supplier threshold, while inventory sales are not. A qualifying transfer of an entire business may use the GST44 election, but a casual asset sale cannot. Confirm high-value, mixed-use, real-property, or whole-business transactions with the CRA or a qualified tax professional before invoicing.