Toronto Small Business Taxes: HST, Ontario Corporate Tax and Catching Up When You're Behind
Toronto small business tax rules: 13% HST, Ontario's 3.2% small business rate, EHT, the Ontario annual return, and how to catch up missed years.
A Toronto small business generally charges 13% HST, pays a combined 12.2% corporate tax on the first $500,000 of active business income (9% federal + 3.2% Ontario) if it's a CCPC, files its Ontario tax on the T2, and files a separate Ontario annual return with the Ontario Business Registry. Fall behind on any of these and the penalties stack up by tax type and by year.
Ontario numbers that matter
| Item | Ontario rule | Source |
|---|---|---|
| Sales tax | 13% HST (5% federal + 8% provincial), one return | canada.ca, HST rates |
| Small business rate | 3.2% Ontario + 9% federal on the first $500k | ontario.ca |
| General rate | 11.5% Ontario + 15% federal = 26.5% | ontario.ca |
| Employer Health Tax | Eligible employers are exempt on the first $1M of Ontario payroll | ontario.ca, EHT |
| Annual return | Filed with the Ontario Business Registry, separate from the T2 | ontario.ca |
Where Toronto owners get caught
The owners who call us from Toronto are rarely brand new. Typically, revenue climbed from a few hundred thousand to $1–3M after 2021, staff got hired, and nobody set up payroll properly or kept HST on a monthly schedule once sales crossed the threshold. Two common cases:
- Payroll crosses the EHT exemption. Once Ontario payroll passes $1M, EHT becomes payable on the excess, plus annual returns. Fast-growing companies often miss this.
- HST filing frequency changes. The CRA assigns frequency based on revenue. Above $1.5M in annual taxable supplies you're generally quarterly, and above $6M monthly. A business that was on annual filing may not notice the switch.
Example (hypothetical): a Toronto agency three years behind
A digital agency in Toronto went from $250k to $2.1M in three years. Its original bookkeeper moved on in 2023 and no T2 or HST has been filed since. The catch-up order: get CRA access, rebuild 2023–2025 from bank and Stripe data, file the HST returns (so input tax credits are claimed before time limits bite), file the T2s oldest first, then fix payroll and T4s. If the CRA hasn't written yet, the Voluntary Disclosures Program should be considered before filing.
GTA neighbours
Mississauga, Brampton, Markham and Vaughan follow the same Ontario rules. Their local guides cover the industries common there: Mississauga, Markham.
Working with a Vancouver-based firm from Toronto
Everything happens online: CRA authorization, a secure document upload, and calls. Sansar works with Toronto businesses as a Toronto business accountant and Toronto bookkeeper for one all-inclusive flat rate, backed by our 100% Happiness Guarantee. Turnaround is guaranteed within one month once we have your documents, and multi-year catch-up usually takes 1–2 months. See catch-up bookkeeping and late tax filing.
Book a call for a custom quote → · How onboarding works and what documents we need →
FAQ
What is the HST rate in Toronto? 13%. That's 5% federal GST plus 8% Ontario, reported on one GST/HST return to the CRA.
Do Ontario corporations file a separate provincial tax return? No. Ontario corporate tax is calculated on schedules in the federal T2. The Ontario annual return is a separate corporate registry filing, not a tax return.
What's the corporate tax rate for a small Toronto business? For a CCPC's first $500,000 of active business income, generally 12.2% combined (9% federal + 3.2% Ontario).
When does a Toronto business have to pay Employer Health Tax? Eligible employers are exempt on the first $1 million of Ontario payroll. Larger payrolls pay EHT on the excess.
Can I catch up several years of Ontario filings at once? Yes. The books are rebuilt year by year and returns are filed oldest first, ideally with a VDP review before filing if the CRA hasn't contacted you.
Written by Gurdeep Sangha, founder of Sansar Solutions, a Vancouver-based bookkeeping and tax firm serving small businesses across Canada (mainly Ontario, Alberta and BC). Sansar is not a CPA firm; Notice to Reader and review engagements go through partner CPAs. This guide is general information, not tax or legal advice for your situation. Last reviewed: October 2026.