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The Bookkeeper's Notes, Issue #012 Sales Tax
October 15, 2012

Welcome to this issue of The Bookkeeper's Notes newsletter focusing on good bookkeeping practices.

If you are a regular site visitor, you know that is committed to educating and providing support to ... work from home business owners. I sincerely hope you find this newsletter useful and practical.

If you like this e-zine, feel free to forward it to a friend. You'd be doing me a huge, huge favour. If a friend did forward this to you and you like what you have read, please subscribe by visiting my site.

In this issue, I thought I'd chat about sales tax as BC begins transitioning back to PST + GST and PEI transitions to HST on April 1, 2013. I've started a page that captures any relevant news about the reimplementation of PST in BC. I am going to try and start a section for tracking PEI announcements on my existing HST pages.

Under feature products this issue, I chat about how I am able to offer free information on this site.

This newsletter gives you access to the links of a handful of web pages that are password protected … my newsletter subscribers have exclusive access to these bookkeeping lists and procedures. You will need The Insider's Pass (a password) to access them, which you will find in the second to last section of the newsletter.

I just wanted to mention to readers that two services I provide are general ledger reviews for small business owners doing their own books and mentoring newbie self-employed Canadian bookkeepers.

Fall is here. In Canada we've already celebrated Thanksgiving.

This morning the northern lights were dancing all over the sky with bursts of white light. The lights started in the west, moved in tandem slowly across the sky to the northwest, then north ending in the northeast. They disappeared as the sun rose. My camera isn't good enough ... so no pictures to share.

However, I do have a picture from my recent visit to Butchart Gardens in Victoria, BC. I have to tell you that dusty miller never, ever looks that good in my pitiful garden!

It is my sincere hope that the information I provide on, and in this newsletter, will help you learn good bookkeeping practices to manage your business finances easily and more efficiently. It can be tough coming up with ideas on what to write about. If there is something you'd like me to cover, please drop me a line.

To your success! ... and, of course, thank you for subscribing to this e-zine.

Until next time,

Laura (aka Lake) :0)
Lakeshore Bookkeeping Services

P.S. I would like to remind you there is a difference between information and advice. The general information provided in this e-zine or on my site should not be construed as advice. You should not act or rely on this information without engaging professional advice specific to your situation prior to using my site content for any reason whatsoever.

image of woman performing bookkeeping tasks on a computer courtesy of

In This Issue ...

  • Focus on Bookkeeping - Sales Tax
  • Feature Product - About Product Recommendations
  • In the Forum - Ask a Free Bookkeeping Question
  • Recent Canada Revenue Agency (CRA) News
  • Recent Internal Revenue Service (IRS) News
  • The Insider's Pass - The Current Password is Here
  • New Pages, Additions and Revisions - Enjoy a cup of tea while you browse

Focus On Bookkeeping - Sales Tax

As BC starts to ramp up to transition back to provincial sales tax (PST) ... and PEI transitions to HST ... on April 1, 2013, I thought I'd just chat a bit about sales tax.

The following acronyms will be referred to in this article. I know it sounds like a foreign language but this should help you sort it out:

  • RST - Retail Sales Tax (type of sales tax)
  • VAT - Value Added Tax (type of sales tax)
  • PST - Provincial Sales Tax (levied provincially and administered provincially; is a RST and may be referred to as a SST - Social Service Tax)
  • GST - Goods and Services Tax (it is a VAT levied federally by CRA)
  • HST - Harmonized Sales Tax (it a blended sales tax that has a federal (GST) and provincial (PST) portion and is administered by CRA)
  • QST - Quebec Sales Tax (is a RST; note the GST collected in Quebec is administered in Quebec)

To do a proper set of books, bookkeepers need to know a bit about taxes especially sales tax and payroll taxes if applicable. As a matter of fact, it is imperative to have a good foundation because not applying the rules correctly when processing the business transactions could lead to deep caca with the CRA or IRS. Everyone knows that once you are in deep caca with either tax agency, it is darn hard to wipe the muck off!

Sales tax, in one form or another, was first introduced during the depression era in both Canada and the US.

The U.S. is one of the few countries in the world that does not have a value added tax. I found two interesting papers on Canada's sales tax system while preparing for this article.

The first paper is titled "Sales Taxes In Canada: THE GST-HST-QST-RST “System”" published on the American Tax Policy Institute website. The paper discusses why a VAT would work in the US with Canada's system as a model and how it could be improved.

The second paper is titled 2012 Annual Global Tax Competiveness Ranking – A Canadian Good News Story published on the The School of Public Policy, University of Calgary website. The paper discusses is a snapshot of Canadian taxation measured against 89 other nations.

Instead of a VAT in the U.S., there is a sales tax and a use tax. Although I don't have any bookkeeping experience with the two types of tax, I did a quick bit of research (mainly Wickipedia) to see how it compares to Canada's sales taxes.

It is my understanding sales tax and use tax are levied by the state and not federally. Not all states have a sales tax or use tax. Wickipedia has a summary table by jurisdiction. The rates and what is taxed varies widely.

PST charged in Canada is fairly similar with only slight differences. GST is uniform across Canada. HST rates vary with only slight differences in the items taxed on the provincial portion of the tax.

In Canada, we don't distinguish between a sales tax and a use tax. The federal government as well as the provinces and territories can levy a sales tax. Instead of a use tax, place of supply rules govern when to charge out-of-province GST/HST tax rates and when to self assess the goods and services tax (GST/HST). Provinces with a RST also have self assessment policies. Generally all non-residents of Canada can apply to have any sales tax paid while in Canada rebated.

In the U.S., sale tax applies to the sale or lease of goods and services within a state in the U.S.

It is my understanding that in the States, the use tax applies to goods made and purchased out of state where your state sales tax has NOT been paid ... and is self-assessed. I believe the use tax applies to online purchases and on personal use of your business' inventory as well. Some states will permit an offset of sales tax paid in another state when calculating the use tax.

During the lead up to the implementation of HST in BC and Ontario in July 2010, I wrote a few chats about taxes. If you are interested in more information on this topic, check out these chats:

Improve Your Cash Flow
Actively Manage Your Accounts Receivable

How to Train Your Clients to Pay You So You Can Stop Making Those Embarrassing Phone Calls!

Click here for more information.
30 day money back guarantee.

Click on any logo to see my full review.

How I Offer So Much Free Information On This Site

My IP host made a major investment redesigning the software which let's me build this site without being a computer techie.

As a result, I am slowly converting the 500 pages of this site over to the new version of software. I'm taking the opportunity to redesign the site a bit as well.

One of the changes I've introduced is a Recommendations section on the left hand side navigation bar. Here are the products and services I recommend that I think would be useful to my site visitors.

I'd like to take a few minutes of your time to explain how I am able to offer so much free information on this site compared to others.

If you buy something by clicking on one of the product text links/images on the Bookkeeping-Essentials site, I earn a commission. It's an extra step that allows me to continue to provide free resources to visitors just like YOU.

If you choose to go directly to the site and purchase the product ... or look around their site afater clicking a link ... then decide to buy, I do NOT earn a commission.

Please do support my affiliates and recommendations.

This site takes time and effort to deliver original content, free, to you.

Supporting my affiliates is a WIN-WIN-WIN for you, me, and them.

Click on any logo to see my full review.

In the Forum - Ask a Free Bookkeeping is Open

I want to thank all my site visitors for taking the time to use the customized search boxes found throughout the site to see if your question has been asked and answered previously.

If you find a question that is close but doesn't quite answer your question, please don't hesitate to ask your question through the comments section on that topic rather than start a new question. The reason for this change is some search engines penalize a site if there is too much duplicate information.

Please note, as this is a free service, it may take up to two weeks before a response is published. I am now selective in which questions are responded to ... that's because many of the questions being asked can already be found on the website.

If you would like me to personally answer a bookkeeping question for you, my Ask A Private Bookkeeping Question service is still available. My fee is $75 per question. Response time is within 2 business days.

For Information Purposes:

People who submit their questions through my contact form, need to answer "Yes" to the question, "May I publish your comments?", to allow me to respond to your question in the forum ... or you need to purchase a private question. If neither of these options have been utilized, I do apologize but your question will remain unanswered.

People who post a question in the forum without including their email address, you need to know you may miss the response I give in the event I reclassify your post to an existing forum posting with the same or similar topic.

A reminder that this is NOT a tax site. Questions related to personal tax (i.e. not relating to the tax form T2125 Statement of Business or Professional Activities) or specific tax advice, as opposed to bookkeeping questions for small business owners who work from their home, will not be posted. Please seek out a tax professional in your area to assist you or visit The owner of the site is a retired CGA.

Ask a Private Bookkeeping Question

Purchase your private bookkeeping question here ...

Current News

I rearranged the navigation bar on the site so that it is easier for you to keep up with current news. Now you will always be up-to-date and "noise-free" as I report only the important material I think small business owners need to know.

All of the items discussed in this issue were published on one of the news pages.

Be sure to check these pages between newsletters for ongoing up-to-date information as I won't be publishing them in the blog unless there is a major news announcement:

Recent CRA News ... and Other Government News

EI rates for 2013 were released mid September. You can find them here.

CPP rates for 2013 are expected to be released in early November. Watch the CRA News pages once they've been released.

Two recent court challenges prompted JonHall Tax Solutions to write a great article about the income reporting requirements for EBay sellers. Click here to learn more about this article.

IT-396R Interest Income reviews how to compute and report investment income when no principal or interest payments are made on a loan. Read more here.

CRA released a new publication on the documentary requirements for claiming input tax credits. It is worth reviewing. Learn more here.

Check out The Bookkeeper's News (The Small Biz News) page for free tax guides, good practice checklists and tool kits released over the past two months.

Prescribed interest rates for the fourth quarter of 2012 remained unchanged. The last rate change was July of 2010 when corporate rates for overpayment of taxes was introduced. Find the interest rate tables here ...

Humour by Advice ... with Dr. Julia Chicken

Recent IRS News and Related News

Sole proprietor returns are due today if you filed the automatic 6 month extension.

IRS released their newly redesigned website. Parts of it are much more user friendly. If you need to find something that you can't locate, try looking in the upper right hand corner for the "information for" menu. This menu has the navigation bar from the old site design.

As a result of the site redesign, some of my links may no longer work. I'm slowly finding them and revising them. If you happen across any, I'd appreciate it if you let me know so I can correct the link.

The simplified per-diem rates remain unchanged for 2013.

I'm expecting the 2013 social security wage base and COLA to be announced in late October. The SSA normally set the rates for the coming year each October ... although not really sure if this is the case this year as it is an election year ... and the Social Security tax cut will need to be extended. If it isn't, employees rates will return to 6.2%. I will post it on the IRS News page once they have been released.

I will also post the 2013 standard mileage rates on the IRS News page when they are released in early December.

Notice 931 has been updated for 2013 deposit requirements for employment taxes.

Applicable Federal Rates are updated each month. The current AFR can be found here.

IRS interest rates for the fourth quarter of 2012 held steady. You'll find the updated interest rate tables here ... along with the first quarter rates for 2013 once the rates are available.

If there is any additional information you would like me to track regarding IRS compliance, please drop me a note.

The Insider's Pass

The Insider's Pass gives you access to the pages in Bookkeeping Essentials that are available only to newsletter subscribers ... my way of saying thank you.

The "preview pages" for all but bookkeeping entries are no longer available.

Here's how it works. To view the article, you will need your Insider's Pass for access. The password will change with each newsletter … every two months. So if you ever forget, you will always find the most current password in your current issue of The Bookkeeper's Notes.

The current password is Iloveturkey (it is case sensitive so that is a capital i and a small L) ... as we give thanks for all the blessings in our lives. ;0)

Here is a list of the pages which are password protected so that only my very important subscribers ... that would be YOU :0) ... have access.

Internal Controls

Bookkeeping Checklists

Month End Procedures

Adjusting Entries

Monthly Financial Review or How to Supervise Your Bookkeeper

Bookkeeping Entries - Journal Entry Examples
Preview Routine Bookkeeping Entries - No password page
(Accounts Receivable, Accounts Payable, Inventory)
Preview Common Bookkeeping Errors - No password page
(Capital Assets, Banking, Taxes, Year-end)
Entire Article - Password protected page

New Pages, Additions and Revisions

As I mentioned last month, I will be moving the 500+ pages to the new system. One of the things I'm in the process of updating are the look and feel of the numerous tables found throughout the site. One feature I'm incorporating is a "hover" feature. When you are looking at a line in a table, you will now be able to hover your mouse over it and the text will change color ... making it easier to read the information you are focusing on. How cool is that!

Another feature I'm introducing is something called breadcrumbs. At the bottom of converted pages, you will see a path so that you can locate where the page you are reading resides.

You may have noticed, but in case you didn't I'll let you know, that as I convert an existing web pages to the new software, I publish it on my blog. There may or may not be updated information on the coverted page. One example of an update - I found a new article about preparing for tax audits. I placed the link in the chat "What to do if you receive a tax audit notice".

I split the GST/HST registration chat into two parts as it was getting too large. Part 1 deals with how GST/HST works; part 2 covers what happens after you are registered. Loans to shareholders now has its own page.

You may experience some broken or misdirected links on the site as I begin the changeover. I would truly appreciate you dropping me a line to me know when this happens.

If you have things you'd like to see on the site, or you wish were arranged differently, now is the time to send me an email with your comments and wishes.

This wraps up this issue of The Bookkeeper's Notes newsletter. I'll touch base with you again in December.

Comments? Ideas? Feedback? I'd love to hear from you. Just reply to this e-zine and tell me what you think!

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