Sales Tax

Question 1

What is GST/HST?

Answer 1

a value-added tax that is charged at each stage of the supply chain

Question 2

Taxable Supply

Answer 2

a supply that is made in the course of a commercial activity

Question 3

What does commercial activity exclude?

Answer 3

a business run by an individual, certain partnerships, and certain trusts without a reasonable expectation of profit

the provision of exempt supplies

the provision of employment services

Question 4

Define Zero-rated Supplies

Answer 4

taxable supplies subject to a 0% tax rate

Question 5

Examples of zero-rated supplies

Answer 5

basic groceries (excluding snack food)

prescription drugs

medical and assistive devices (such as prescription glasses)

most exports

Question 6

Define Exempt Supplies

Answer 6

goods and services that are not subject to tax

Question 7

Examples of Exempt Supplies

Answer 7

sales of used residential real estate and long-term residential rents

financial services (including insurance)

health and dental services

educational courses toward a degree or diploma

childcare services

Question 8

Define Input Tax Credit (ITC)

Answer 8

The recovery of eligible GST/HST paid on taxable supplies used to earn business income

exempt supplies are not entitled to this

Question 9

ITCs that CANNOT be Claimed

Answer 9

the cost of a passenger vehicle used in a business in excess of $30,000

monthly lease payments for a passenger vehicle used in a business in excess of $800 per month

club memberships

the non-deductible half of meals and entertainment expense

personal or living expenses

Question 10

Quick Method

Answer 10

Annual taxable supplies, including zero-rated supplies, of $400,000 or less

Not available to a person providing legal, accounting or consulting services

Election is required

Question 11

Simplified ITC Method

Answer 11

Taxable supplies made in the preceding year of $1,000,000 or less (including zero-rated supplies), and annual taxable purchases made in the preceding year of $4,000,000 or less (excluding zero-rated supplies)

No restriction on type of registrant

Election is NOT required

Question 12

Amount of GST/HST to remit to the CRA is calculated how?

Answer 12

Apply the specified remittance rate to taxable supplies sold in the year (excluding zero-rated supplies)

deduct the lesser of 1% of $30,000 and 1% of taxable supplies made in the year (excluding zero-rated supplies)

deduct ITCs on capital expenditures at the regular GST/HST rate for the province

Question 13

Formula for Simplified ITC Method

Answer 13

[GST/HST rate / (100 + GST/HST rate)] x GST/HST inclusive on fully taxable purchases

Question 14

Items EXCLUDED from GST/HST Fully Taxable Purchases

Answer 14

capital expenditures for real property (ITC is determined separately)

purchases of zero-rated supplies

purchases of exempt supplies

Question 15

Everyone must register for GST/HST who sells taxable supplies in Canada in a commercial activity UNLESS…

Answer 15

The person is a small supplier.

The only commercial activity of the person is the sale of real property not in the course of a business.

The person is a non-resident who does not carry on business in Canada

Question 16

Define Person

Answer 16

Includes: an individual, partnership, corporation, estate, trust, society, union, club, association, commission, or other organization.

Question 17

Define a Small Supplier

Answer 17

one whose sales of annual GST/HST taxable supplies, including zero-rated supplies, do not exceed $30,000.

Question 18

2 Tests to Determine when the Small Supplier Exemption CEASES to Apply

Answer 18

1. Last Four Calendar Quarters Test

2. Calendar Quarter Test

Question 19

Last Four Calendar Quarters Test - When a person ceases to be a small supplier

Answer 19

If, during any four consecutive calendar quarters, taxable supplies sold exceed the $30,000 limit, the supplier ceases to be a small supplier at the end of the month following the quarter in which the $30,000 limit was exceeded

Question 20

Last Four Calendar Quarters Test - Date Required to begin Collecting GST/HST

Answer 20

The first day of the second month following the end of the calendar quarter in which the $30,000 limit was exceeded

Question 21

Last Four Calendar Quarters Test - Requirement to Formally Register

Answer 21

Within 29 days of the first day of the second month following the end of the calendar quarter in which the $30,000 limit was exceeded

Question 22

Calendar Quarter Test - When a person ceases to be a small supplier

Answer 22

When a person’s revenue from taxable supplies exceeds $30,000 in any calendar quarter, the person ceases to be a small supplier immediately before the sale resulting in exceeding the $30,000 limit is made

Question 23

Calendar Quarter Test - Date Required to Begin Collecting GST/HST

Answer 23

The date in the quarter when the sale resulting in quarterly sales exceeding $30,000 was made; GST/HST is required to be collected on the sale that caused the $30,000 limit to be exceeded

Question 24

Calendar Quarter Test - Requirement to Formally Register

Answer 24

Within 29 days after the date the person is first required to collect GST/HST

Question 25

Reporting Periods:

Taxable Supplies More than $6,000,000

Answer 25

Monthly

Filing Deadline: Within one month following the end of the reporting period

Remittance Due: Same as above

Question 26

Reporting Periods:

Taxable Supplies $1,500,001 to $6,000,000

Answer 26

Quarterly

Filing Deadline: Within one month following the end of the reporting period

Remittance Due: Same as above

Question 27

Reporting Periods:

Less Than $1,500,001

Answer 27

Annual

Within three months following the end of the reporting period

Remittance Due:
Where the entity’s GST/HST payable for the preceding period is $3,000 or more, quarterly instalments are required and are payable within one month after the end of each fiscal quarter

Where quarterly instalments are not required, remittance is due at the same time as the filing deadline