What Happens If You Collect HST but Don't Remit It in Ontario

When cash flow gets tight, the HST sitting in a business's bank account can look tempting to use for payroll, rent, or a supplier invoice. It feels like your money, since it came in through your own sales. It isn't. Understanding what actually happens when a business spends HST it collected instead of remitting it to the CRA can be the difference between a manageable correction and a serious enforcement problem.

This article walks through why collected HST is treated differently from ordinary revenue, what CRA can do when it isn't remitted, and how the consequences escalate depending on whether the situation looks like an honest cash-flow mistake or something more deliberate.

HST Is Held in Trust — Not Business Revenue

Legally, the HST you charge and collect from customers is not your business's money. You are collecting it on behalf of the federal government, and you are expected to hold and remit it — the amount sitting in your accounts as "HST payable" already belongs to the Crown, whether or not you've filed your return yet. Spending it on operating expenses doesn't change who it legally belongs to; it just means you now have to find that money from somewhere else when the remittance comes due.

What Happens When You Don't Remit

When a return is filed but not paid, or a return isn't filed at all, CRA doesn't stay quiet for long. The typical sequence looks like this:

1. CRA notes the outstanding amount once a return is filed showing a balance owing, or once a required return is missing entirely.
2. Interest begins accruing on the unremitted amount, calculated at CRA's prescribed rate for amounts owed — a rate that applies to GST/HST arrears the same way it applies to unpaid income tax, and that CRA sets and updates quarterly (as of mid-2026 the arrears rate was 7% — verify the current rate before relying on it, since it changes).
3. CRA collections action can follow for amounts that remain outstanding, ranging from demand letters to more formal collection tools.
4. Ongoing non-remittance compounds the problem, since interest keeps accruing on top of a growing principal balance.

Interest and Penalties on Unremitted HST

Beyond interest, CRA can assess penalties tied to late filing or late remittance, and the amounts involved can grow quickly the longer a business goes without addressing the shortfall. Because penalty calculations depend on the specific circumstances — how much is owed, how late it is, and whether it's a repeat issue — there's no single number that applies to every case. What's consistent is that the cost of catching up only grows the longer the balance sits unaddressed.

When It Crosses Into Personal Liability

For incorporated businesses, unremitted HST doesn't necessarily stay a "corporate problem" that disappears if the company can't pay. Directors of a corporation can become personally liable for the corporation's unremitted GST/HST — commonly called director's liability — if the corporation fails to remit and certain conditions are met. This is one of the sharpest edges of HST non-remittance: it can reach past the corporate shield into a director's personal assets.

When It Crosses Into Criminal Territory

Not every unremitted HST situation is treated the same way, and the distinction matters:

• An honest error — a bookkeeping mistake, a missed deadline during a genuinely difficult stretch — is typically handled as a civil matter: interest, possibly penalties, and a plan to catch up.
• Tax avoidance — structuring things to minimize tax within the rules — is legal, though CRA can still challenge whether a particular arrangement crosses a line.
• Tax evasion — deliberately collecting HST with no intention of remitting it, or falsifying records to conceal it — is a criminal matter that can be prosecuted, separate from and in addition to the civil interest and penalties.

The line between these categories often comes down to intent and pattern of conduct, which is exactly the kind of fact-specific question worth getting legal advice on before assuming you know where your situation falls.

If You're Behind: Your Options

• Get current returns filed even if you can't pay in full immediately — filing stops one category of penalty from compounding further.
• Contact CRA proactively about a payment arrangement rather than waiting for collections action.
• If the shortfall involves a filing error you haven't yet been caught for, ask a tax professional whether the Voluntary Disclosures Program could reduce your penalty and interest exposure.
• Get legal advice early if directors' personal liability is a realistic concern — the earlier you address it, the more options are typically available.

Frequently asked questions