Sales Tax Flashcards
What is GST/HST?
a value-added tax that is charged at each stage of the supply chain
Taxable Supply
a supply that is made in the course of a commercial activity
What does commercial activity exclude?
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
Define Zero-rated Supplies
taxable supplies subject to a 0% tax rate
Examples of zero-rated supplies
basic groceries (excluding snack food)
prescription drugs
medical and assistive devices (such as prescription glasses)
most exports
Define Exempt Supplies
goods and services that are not subject to tax
Examples of Exempt Supplies
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
Define Input Tax Credit (ITC)
The recovery of eligible GST/HST paid on taxable supplies used to earn business income
exempt supplies are not entitled to this
ITCs that CANNOT be Claimed
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
Quick Method
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
Simplified ITC Method
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
Amount of GST/HST to remit to the CRA is calculated how?
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
Formula for Simplified ITC Method
[GST/HST rate / (100 + GST/HST rate)] x GST/HST inclusive on fully taxable purchases
Items EXCLUDED from GST/HST Fully Taxable Purchases
capital expenditures for real property (ITC is determined separately)
purchases of zero-rated supplies
purchases of exempt supplies
Everyone must register for GST/HST who sells taxable supplies in Canada in a commercial activity UNLESS…
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
Define Person
Includes: an individual, partnership, corporation, estate, trust, society, union, club, association, commission, or other organization.
Define a Small Supplier
one whose sales of annual GST/HST taxable supplies, including zero-rated supplies, do not exceed $30,000.
2 Tests to Determine when the Small Supplier Exemption CEASES to Apply
- Last Four Calendar Quarters Test
2. Calendar Quarter Test
Last Four Calendar Quarters Test - When a person ceases to be a small supplier
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
Last Four Calendar Quarters Test - Date Required to begin Collecting GST/HST
The first day of the second month following the end of the calendar quarter in which the $30,000 limit was exceeded
Last Four Calendar Quarters Test - Requirement to Formally Register
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
Calendar Quarter Test - When a person ceases to be a small supplier
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
Calendar Quarter Test - Date Required to Begin Collecting GST/HST
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
Calendar Quarter Test - Requirement to Formally Register
Within 29 days after the date the person is first required to collect GST/HST
