Table of Contents GST/HST Guide
Registering For GST/HST
After You Are Registered
Place of Supply Rules Flowchart
Invoice Presentation Rules, 3 Methods of Accounting, PEI Transitional Bulletins
Returning To PST in BC Rates, Timeline, Overview
This is the Table of Contents for The GST HST in Canada Guide. It is The Bookkeepeer's Handy Reference to articles and sidebars on GST (goods and services tax) and HST (harmonized sales tax).
What you will find in this series ...
We'll begin this somewhat lengthy chat with ...
... begin with this guide on registering for GST and HST in Canada:
Let me show you how to find the GST/HST paid in a transaction.
Let's say you have a business in Ontario and purchased an item that cost $224.00 including sales tax. Sales tax in Ontario is 13% HST.
You want to know how much of that $224.00 is sales tax. Here's how you do it.
$224.00 (total purchase amount) / 1.13 = $198.23 (purchase price excluding sales tax) where / means divide.
$200 x .13 = $25.77 (amount of HST paid) where x means multiply.
If you want to skip the 2 step calculation and go right to calculating just the sales tax paid, multiply $224 by .11504 where .11504 = .13/1.13
If you live in a different province, replace .13 with your sales tax amount.
When Registration is Mandatory
... after you have completed your GST HST Registration, you'll want to know about:
Part Two of the Guide
How To Register and How GST/HST Works
How Your Accounting System Tracks GST HST
Things To Watch For and Schedule
Perhaps You Want Some Information on HST or reimplementing PST in BC
There is a special rule that says if 90% or more of your supplies (sales to customers) were made through your permanent establishment (where your business resides), you can assume all supplies (sales to customers) were made in that province and use the appropriate participating/non-participating sales tax rate.
LET'S CHAT ABOUT ...
Goods and services tax is a value added tax (VAT) on goods and services produced by businesses. This tax is passed along to the consumers of the products and services so sometimes it is also referred to as a consumption tax (as opposed to income tax which is a tax on your earnings).
Harmonized sales tax is a combination of the federal GST along with a provincial sales taxcomponent. Instead of two separate taxes, it is a single value added tax. The HST is administered by the federal government who then remits to each participating province.
Businesses operating in Canada are responsible for collecting both taxes and remitting the tax funds to the government ... which means they, not the government, bear the costs associated with the collection.
Canada adopted GST in 1991 to replace the manufacturers' sales tax which taxed the total resale value of a manufacturer's goods ... not just value added
... VAT is a regressive tax ... if not combined with other tax strategies.
Wikipedia describes a regressive tax as one that "imposes a greater burden (relative to resources) on the poor than on the rich - and there is an inverse relationship between thetax rate and the taxpayer's ability to pay as measured by assets, consumption, or income.
What I find interesting in this is that I always thought of GST as a fairer tax than income tax because everyone has to pay it - rich or poor. The rich have more discretionary income so they spend more and they pay more tax.
The poor and working poor have less to spend so they pay less; and when you factor in:
... the tax is applied mainly to discretionary income which the consumer has control over ... so GST seems more progressive to me than regressive especially when compared to income taxes ... hmmm I'll have to do more research.
What I Found When I Did More Research On ...
GST HST In Canada
If you are interested, I found a great article written by David Sherman, a leading GST tax expert in Canada. He is a tax lawyer.
The article I found is on page 839 of the October 2009 Canadian Tax Journal publication titled Policy Forum: Tax-Included Pricing for HST-Are We There Yet?. It can be located at http://www.ctf.ca/ctfweb/Documents/PDF/2009ctj/09ctj4-policy.pdf.
One of the points in his introduction explains that the United States is one of the few countries in the world that does not have a value added tax. Later in his article (the section is entitled: Tax-Included Pricing Is Better for the Economy), Mr. Sherman explains that tax experts and economists almost universally agree that GST is a "good" tax.
Jack Millar wrote an article for the Canadian Tax Foundation in October 2009 with his case for maintaining tax exclusive pricing. The article is titled Policy Forum: The Case for Maintaining Tax-Exclusive Pricing.
Mr. Millar points out that tax-exclusive pricing results in greater political accountability through increased tax consciousness by taxpayers.
The article can be located at http://www.ctf.ca/ctfweb/Documents/PDF/2010ctj/10ctj1-millar.pdf.
I have collected information about sales tax ... some great newspaper articles and papers published on the benefits of HST. I know the transitioning for HST has been completed; I decided to keep this research available as it really does help in understanding how the tax works. Here are a few:
Two articles written in late September, 2010 on HST are:
... Tony Wilson's (Globe and Mail) Dear readers: I've done the math, and HST wins ... a follow up to his article titled HST is good public policy and a good tax published on September 14, 2010
... and Craig McInnes's (Vancouver Sun) September 27, 2010 article titled HST may not be costing you as much as you think - change to hated sales tax punishes big spenders the most was a good read but it is no longer available on the Vancouver Sun website.
On September 1, 2010, The Fraser Institute issued an article that debunks 10 HST myths being propagated.
Here are a few facts:
The HST is tax neutral and not a tax grab as personal income tax cuts offset the gain. The HST will have virtually no impact on the average British Columbian and no impact on tax freedom day.
The HST will not increase prices. In fact it will have little impact on prices as the removal of PST on business inputs works it way through the system. The HST broadens the tax base so some previously PST exempt items will increase (but not by 7%) and the price of items not PST exempt will drop. HST removes the preferential treatment of a few sectors.
The HST will make previously hidden taxes visible and save businesses about $150 million in tax compliance costs annually. The BC government will save about $30 million annually in administration costs.
You can read the whole report at fraserinstitute.org> reasearch & news>research topics> taxation> articles> No need to fear the HST.
David Robertson, a tax lawyer with Fasken Martineau presented a paper in September 2005 at the CICA Commodity Tax Symposium entitled Sales Tax Harmonization: The Facts & Nothing But The Facts. The article concludes that when VAT is compared to RST, VAT wins.
"As to the choice between which system is better, it is clear that the value-added tax system is superior as it (a) is more equitable, (b) less regressive, (c) minimizes cascading and double taxation, (d) promotes international competitiveness and domestic prosperity, and (e) is less susceptible to evasion."
A copy of Mr. Robertson's article is available on the firm's web site, www.fasken.com.
I also found a great article by Frances Woolley that explains the difference between HST and PST. You will find it at the website of Worthwhile Canadian Initiative, A mainly Canadian economics blog ...http://worthwhile.typepad.com/worthwhile_canadian_initi/2010/04/hst.html
Fraser Institute economists published an article in the National Post titled Don't believe the anti-HST rhetoric. The Institute explains how HST works to our benefit.
A basic lesson in economics and the HST published in the Globe and Mail is worth reading.
I also found a 1993 paper by Richard Domingue titled The GST: An Overview of Some Alternatiaves. It is worth a read.
BC voted to scrap the HST in August 2011. You can read some visitor comments from my informal HST Poll (now closed) by clicking here.
LET'S CHAT ABOUT ...
GST HST Place of Supply Rules in Canada
May 1, 2010 was an important date. New place of supply rules came into effect.
The new GST HST place of supply rules now place a greater emphasis on the location of your customer.
Generally, HST began to apply to any amount that was paid without having come due OR comes due ... if the amount related to the period July 1, 2010 or later. There were some exceptions.
Take the time to review your bookkeeping work as there is a high probability CRA will be auditing transactions relating to the HST transition period.
Commonly Asked Questions About HST
Q. Is my GST registration number now my HST registration number?
A. Yes. Your GST registration automatically registers you for HST.
HST registration for British Columbia and Ontario works exactly the same as GST registration with all the same rules as GST. Just be aware that as of May 1, 2010, there are new place of supply rules for GST and HST.
Q. What is a non-participating province?
A. A non-participating province is a province that does not charge HST ... they charge GST and may or may not charge a provincial sales tax. Currently, non-participating provinces are the three territories plus Alberta, Saskatchewan, Manitoba, and PEI.
Q. What is a participating province?
A. A participating province is a province that charges HST. Currently, participating provinces are BC, Ontario, New Brunswick, Nova Scotia, Newfoundland and Labrador.
Q. What is the Quick Method rate for BC?
A. You can find the Quick Method rates for BC and the other provinces on The GST HST Quick Method Rates page.
You need to be aware that with the new place of supply rules, you will have different rates depending on the location of your customer in Canada.
You may want to consider changing your method of reporting GST HST to CRA. From a bookkeeping perspective, the Quick Method (and Simplified Method) is more difficult to apply than simply tracking the actual tax.
Q. What are the GST HST invoicing requirements?
A. GST HST invoicing requirements are discussed in How to Create an Audit Trail. You have three choices dependent on the value of the invoice.
If you have point of sale rebates to invoice, you have three presentation options.
Follow the links for more detailed information on GST HST invoicing requirements.
Q. When is my monthly HST report due?
A. Your monthly HST report is filed on the same report as your GST and has the same due dates / deadlines.
Find more questions and answers on HST in Transitioning to HST
Here are GST HST questions that have been asked in The Bookkeeping Forum. Feel free to check them out and give your opinion or share your expertise.
As more questions are asked, more links will show up here. So if you have a question ... and are willing to be patient while I use my resources to learn along with you ... ask away.
HST Payable - Negative
I am doing my HST quarterly and my starting balance for HST account is -545.13 in "transactions by account". I think it should be zero. My debit column …
Canadian Sales Tax Help
I use Quickbooks. When recording expenses do I include the HST paid? It was already reported as an ITC for my fiscal quarter. It almost seems like …
GST on Meals Adjustment
What account would you debit to adjust the GST/HST for the amount that is not eligible for the ITC (50%) on meals? I think GST would be credited for …
Recording a GST Reassessment
How do you post this a reassessment from an audit where there is additonal GST owing in a prior year? It is a credit or a liability? It can't be an …
HST and Private Sale of Vehicle
As a sole proprietor in Ontario do I collect HST as part of the sale when I sell a vehicle (used both personally and in the business) to a private citizen? …
When to Charge GST/HST
I am a sales estimator sub-contractor. I've been invoicing my boss for my work this current year. I have made over the $30,000 mark and I have obtained …
Imputing HST on Receipts
I have several receipts (for a course, insurance (car and teaching) and for memberships) that do not state the HST I've paid but only the final amount …
Sales added to filed GST period
In a moment of lunacy it seems I've edited customer invoices and increased the invoiced amount thereby increasing sales revenue in a prior GST period. …
GST Under 30K
We are starting a small consulting/teaching business. We registered and got a GST number. We don't expect to earn more than $30K per year. Are we required …
HST Installment Payments
Hi, Can I pay an installment on a current Q2 HST payable bill rather than the whole amount? I have always attached full payment owing to the quarterly …
GST/HST ITC on Meal Allowance
Can a transportation driver claim GST/HST I.T.C.'s on meal allowance amounts when they have used the $45.00 per day method rather than using actual receipts? …
Annual GST/HST Filer
Hi, I am having difficulty understanding why, when I have a December Year End and sales are LT 1.5 million, I keep receiving a paper return which tells …
Self Employed Consultant
How do I pay GST/HST? I am a self employed consultant working on commission. I bill a company quarterly for my service. Do I pay GST/HST on the total …
HST Charitable Organization
Could you explain how to make the journal entry for a charitable organization (which is eligible for a Public Service Body rebate) on their purchase? …
Manual Bookkeeping Entry for GST/HST Refund
According to your topic "Recording GST/HST Using Manual Accounting Systems", the information provided is super, except for the last paragraph which leaves …
HST Return Collected By Unregistered Vendor
HST Return for 2010 Tax Year. Hi Bookkeeping-Essentials, My small business income is less than $30,000. I collected GST/HST and paid GST/HST …
Newbie to Bookkeeping
Hi, I am currently running my own company which I have recently set-up. There is a question which I would like to seek your help on. I am using …
Home-based Business & GST
Hello, I am a sole proprietor of an Educational Consultant Services based in my home. I am filing GST returns for the 1st time and would like to …
HST Bonus from Revenue Canada
Our company received a $1,000.00 from the government to help with the HST transition. We deposited this 'free money' in the bank, so I know I debit …
HST Charged But No Business Number
I was charged HST by a small supplier (less than $30,000 annually). There was no HST number on the invoice. When questioned, the person said he had not …
GST/HST Split Filing
I am an annual HST filer and have paid my PST up to June 30th 2010. Do I have to file a separate GST up to June 30th then HST from July 1st to Dec 31st …
Eligible Input Tax Credits
Is the GST I paid on fuel, vehicle repairs, equipment rentals & materials purchased to complete contract - considered an 'eligible expense' with respect …
GST34 - Appeal Penalty for Filing Late
I have recently gotten a job with my company and I was supposed to file/pay the HST return (GST34). Unfortunately, instead of paying September HST return …
Selling Remote Assistance Services to US
If you sell remote assistance for software services to US do you charge HST, state taxes or nothing? It is my understanding that when you export …
HST and Reimbursable Expenses
HST - charging reimbursable expenses to clients How do I include on my invoice to my client the expenses for which they are going to reimburse me? …
Business Startup Expenses and HST
HST input credit for a start up business in B.C. I am in the process of setting up a new business. I am incurring expenses, but do not have any …
GST/HST and Tax Exempt Bodies
We are considering a contract for services with an out-of-province GST exempt body. Some of the work will be done by subcontractors that will charge us …
GST/HST $30,000 Threshold
How does the $30,000 GST/HST rule actually work for a sole proprietor with employees? If a sole proprietor's company takes in $200K in sales, but …
I've read on your site about being able to claim net GST paid on a personal tax return. I am self-employed and file an annual GST return, I always pay …
HST Rebate for Charities
I stumbled across your site and have appreciated the wealth of information there. I am a bookkeeper for a charity in BC. Prior to July 1, 2010 we were …
I did my GST at the year end and sent the cheque to Revenue Canada...somehow I made a mistake and ended up getting a refund. How do I put this refund …
Accounting for GST/HST
Accounting for HST/GST When Not An HST/GST Registrant I have a small company and I don't collect GST. What do I do with the GST/PST on receipts …
How To Cancel GST/HST Account
I volunteered to register for GST number. I have a lawn cutting business and will make well under the mandatory 30K. I have not had any business yet …
Place of Supply Rules For GST & HST
On The Rates page, I have information on GST/HST/PST - Out of Province Sales Tax Rates . Effective May 1, 2010, the place of supply rules for intangible …
GST Exempt Services
First off, I'd like to thank you for all the wonderful information found on your website! Here is my question: I'm planning on starting my own fitness …
GST on Mileage
When charging mileage as a disbursement to a client I have to collect GST. I charge the current treasury board rate. To calculate the GST to be charged …
HST Adjustment Simply Accounting
I owe more HST/GST than my tax report says I do, so I have paid the amount I know I owe. My question is, how do I do an adjustment in Simply Accounting, …
My question is about the upcoming PST change in BC. For PST paid on purchases, do I create a separate expense account specifically for PST paid or does …
We will be paying PST on the materials we purchase. We have to charge our supply only customers PST. Can we get a refund of the PST we paid on this …
Posting Expenses When Not GST Registered
I just started a small business and I will not be registering for GST at this time. When I'm posting these invoices, do I post the entire amount (including …
Gas As An Expense
I am wondering about treating gas as an expense and the HST involved ... there is a Fed and Prov portion. Do I just total the two and treat that as the …
GST Charged Incorrectly?
My client is a corporation. He is the only shareholder/director. On a few of his bills that he sent out, he deducted some money that he owed the client …
HST on Inter-Company Transactions
My question is about HST on inter-company transactions. I have recently been hired to do the books for an owner who has several companies, all in entirely …
Financial Institutions Exempt From GST/HST
I understand Financial Institutions (e.g. let's say one of the big five banks) are exempt from GST/HST for most of their services they offer (e.g. deposits …
ITCs Home Office
As a sole proprietor, my office space at home is 10%. Are the ITCs prorated at the end of the period? Do I claim 100% during the year? Is it the …
Display of Sales Tax on Invoices
Do invoices have to show the GST and PST as separate lines or can they be combined?? Hi James, It is my understanding that CRA requires each …
GST and Doing Business in Canada
Hello, I work for a company in Mexico. We are sending material to Canada. We sell transmission towers and we started sending flatbeds into Canada …
Recovering ITCs on Capital Assets
I started a business in 2010 and purchased equipment which included GST. However I did not open my GST account until 2011. Can I still claim the GST …
HST & E Commerce
We are an internet business with a website for folks to order products online, which are then shipped to the client from a warehouse in Canada or a warehouse …
USA E-Retailer Selling Goods to Canadian Residents
We are a 100% internet retailer based in the USA. We are an importer of record via UPS in Mississauga ON. What is the requirement for collecting and …
Reclaim GST Portion of HST Paid
Hi, As a business owner, am I permitted to reclaim the GST portion of HST paid on a purchase (for re-sale) in Ontario? My business is in a province …
ITCs vs. Business Expense on Personal Tax Return
Hello, I have a full time job and my husband and I bought a small business last year. I already claimed all of our business expenses such as bank …
Reporting HST on T2
When doing your business tax (on the short form) is revenue gross or net of HST? I don't know why I would have to pay income tax on tax I collect, but …
GST and US Purchases
Can We Claim A GST ITC For US Purchases? Hi, Firstly, I love your site. Finally, some advice that's easy to read and understand. Thank you! …
HST Business Transition Supplement
How would you account for the HST transition supplement the government pays to qualified businesses? I'm not sure if I should credit an HST related …
My husband started a new business as a tool distributor in Ontario. His first day of sales was April 12, 2010. He collected GST and PST until June 30, …
Where does the Eco tax go in bookkeeping and taxes when filing your GST remittance? Does it stay in with your GST input tax credits? Hi Laurel, …
Charging PST in Manitoba
Does an independent contractor charge PST for services in Manitoba? As I don't live in Manitoba, I went to the Manitoba government website to …
GST / HST for Manufacturers
Question - For Manufacturers, are 100% of the GST / HST takes paid on any goods and services recoverable, as long as we are registered Canadian taxpayers? …
Annual HST Return
How to File a Dual Rate Return In 2010 in Ontario until June 30th invoices carried a 5% GST amount. From July 1st the rate became HST of 13%. Do …
Can I file a NIL GST Return
GST/HST Registered - Can I file a 'NIL' GST/HST Return? I registered my flooring installation business (not a retail business, no materials sold - …
HST and eBay
Do I pay HST on sales to USA on ebay? It is my understanding that as a general rule, sales of goods and services to a non-resident person outside …
GST HST Collected Out of Province
I am a online seller so I sell Canada wide. Do I charge different tax rates depending on where the customer lives; and how do I report all that to Revenue …
HST Registration and Psychology
A psychologist's services are exempt from HST but should she still register so she can reclaim HST paid on office equipment etc? And should all the …
Charging HST Out of Province
HST charged to AB client? Ontario service sold to Alberta HST? I think you are asking whether an Ontario service company who sells services …
GST/HST Paid on Purchases
Line 105 means GST/HST paid on purchases? Form GST34-2-E(10) This my first GST/HST return so for example line 101 will receive a zero as I have not …
T2125 Form and Sales Tax
Entering Expenses Into T2125 Form When entering expenses into the T2125 form, do I include the GST in that expense? Hi Clare, It depends …
Sales Invoices for GST/HST Registrants
I am just wondering if you could site a CRA reference for your info ( from Creating An Audit Trail ) re: "A legitimate business receipt for CRA …
HST/PST over $10 million revenue
Do I need to set up a separate general ledger account to separate the PST portion (8%)from the HST general ledger if my annual revenue is over $10,000,000.00 …
GST Filing in QuickBooks®
I am new to QB (QuickBooks®). I would like to know how to clear the last report from filing GST on line. The last person did not clear the report …
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