A conversation arose on Canadian-writer-Twitter last week about who is required to collect and pay HST/GST in transactions between writers and their various employers (magazines, reading venues, schools, festivals, etc.) Seems some places or events think they’re exempt because they pay in “honoraria”. Consensus seems to be that most writers who are required to collect and pay HST have run up against this at one time or another, and the information sharing was illuminating. That said, none of us are experts, so Bookninja asked an expert. Enter Artbooks. My accountant, my wife’s accountant, my friends’ accountant, and the best damn pals an artist could have. Tova Epp, our point person, takes it from here. Thanks to Artbooks and Tova for having our backs!
BN: Can you please tell us who you are and a bit about Artbooks?
TE: I’ve been a tax preparer at Artbooks for almost 12 years now, and before that I was a long time client. I am an actor by training, and came to Artbooks after receiving some solid recommendations from friends in my field, and now I do those very friends taxes! Artbooks was launched over 30 years ago as Canada’s first organization dedicated to artists and entrepreneurs’ financial sanity. Artbooks is a place where we know and understand artists and freelancers, as the majority of the staff are also freelance artists. As a freelance artist myself I get to bring my own, real understanding of the life of an artist to the tax return, which I think helps me communicate with my clients in a way that they understand and that lets them feel comfortable.
BN: When must a writer collect and pay GST/HST?
TE: If your gross (pre expense) revenue is close to $30,000 you must register for an HST number. That gross revenue includes all freelance income, including foreign income, but does not include grants, which are an exempt HST supply. In the words of the CRA: “If you are a sole proprietor, include the total amount of all revenues (before expenses) from your worldwide taxable supplies from all your businesses”
BN: When must an organization pay a writer GST/HST?
TE: When they pay them! Basically if you are invoicing a Canadian organization you need to be your own best advocate and bill them your HST, or remind them you have an HST number. There’s a huge, common misconception about honoraria and that they are exempt from HST. They are not exempt if they are not a surprise. If you agree to do a reading for $100 in advance and the organization tells you this in advance, it’s not exempt from HST. Of course these organizations won’t pay the HST because they think they’ve found the loophole but in general we just need to do the best we can to get HST from everyone who has offered us a fee for a service. You do not collect HST on grants, and you charge any foreign vendors 0% HST.
BN: For writers who are obligated to collect and pay HST, the most common complaint seems to go like this: the festival/magazine/school/etc. says they will pay $XXX.xx for delivery of a specific service (a piece of writing, an appearance, a reading or performance, etc), but when it comes time to invoice and the writer includes their HST number and appropriate taxes to the bill, the organization says it only has the original $XXX.xx to pay the writer. The reason most often cited is that the payment is considered an “honorarium” and is therefore not taxable (effectively making the writer forfeit the money she will have to pay to taxes later.) Is this true?
TE: Yes, this happens all the time. See above answer. I don’t have a solution to it, it’s just really shitty. Most festivals, etc. are non profits or are functioning on tight operating budgets and they are just not factoring HST into their budgets, which means that there’s no room on their end for extra. It’s complicated and an uphill battle for anyone who wants to fight this, because until there’s formal legislation about it, no one is going to change their practices.
BN: What are the options for a writer if an organization or venue refuses to pay HST when required?
TE: Talk to their accountant…. 🙂 They can back it out of their original fee. There’s always room for a few small honoraria but if all someone is making is honoraria it gets complicaed and needs to be taken on a case by case basis. I can’t offer specific advice about this, as it’s a bit too specific….