Sales Tax Flashcards
When is registration not required
- The person is a small supplier.
- The only commercial activity of the person is the sale of real property not in the normal course of a business.
- The person is a non-resident who does not carry on business in Canada.
Definition of a small supplier
A small supplier is one whose sales of annual GST/HST taxable supplies, including zero-rated supplies, do not exceed $30,000.
Two tests to determine when the small supplier exemption ceases to apply
Last four calendar quarters test
- if sold over 30K within the last 4 quarters (but not in a single quarter) , supplier ceases to be small supplier at the end of month following the quarter the 30K was exceeded.
- Required to start collecting GST the first day of the second month following the quarter
- Required to register within 29 days of the first day of the second month
Calendar quarter test -
- If sold over 30K in any quarter the supplier ceases to be small supplier immediately before the sale resulting in the 30K exceeding transaction is made.
- Required to start collecting GST the date in the quarter the sale resulting in exceeding 30K was made.
- Required to register within 29 days after the date required to collect GST
Sales tax payable - quick method
Annual taxable supplies, including zero-rated supplies, of $400,000 or less
Not available to a person providing legal, accounting, tax preparation, financial consulting or actuarial services
Election is required - annual filers - need to elect by first day of the second fiscal quarter.
No detailed records are required.
Calculated as:
Apply specified remittance rate to taxable supplies sold during year including GST.
BC permanent establishment with supplies in BC is rate of 1.8%
Credit 1% of the first 30K in sales
Deduct capital expenditures at the regular GST rate.
ITC simplified method
- Worldwide revenues from taxable supplies made in the preceding year of $1,000,000 or less (including zero-rated supplies), and
- Total taxable supplies for all preceding fiscal quarters of current fiscal year must be 1Mil or less. (Not including sale of real property)
- annual taxable purchases made in the preceding year of $4,000,000 or less (excluding zero-rated supplies but includes imported supplies)
- Election is not required
- Detailed record-keeping is not required for GST/HST paid on inputs except for GST paid on capital expenditures for real property.
Calculated as: Fully taxable purchases including GST x (GST rate /(100 + GST rate))
Calculate capital real property purchases separately and at the regular rate.
When determining what tax rate to use consider:
Place of supply
Zero-rated supplies
- basic groceries (excluding snack food)
- prescription drugs
- medical and assistive devices (such as prescription eyeglasses)
- most exports
Exempt Supplies
- sales of used residential real estate and long-term (i.e. a month or longer) residential rents
- financial services (including most insurance)
- health and dental services
- educational courses toward a degree or diploma
- childcare services
When a supplier fails to correctly charge and collect GST/HST from a customer in a situation where GST/HST was required to be collected
the supplier has the right to go back and charge the customer after the fact. If the customer refuses to pay the GST/HST, the supplier has the right to sue the customer to enforce collection.
GST treatment on specific items
- meals and entertainment are limited to 50%
- ITCs are denied in full for membership fees for golf, lodge, or yacht clubs
- When a bad debt is established, any GST/HST that was previously remitted prior to the debt going bad may be recovered as an ITC.
- When a registrant pays an allowance, the registrant is deemed to have paid GST/HST on the allowance and is eligible to claim an ITC.
Sales tax filing deadlines
Taxable supplies: More than $6,000,000
Reporting deadline: Monthly
Filing and payment deadline: Within one month following end of reporting period
Taxable supplies: $1,500,001 to $6,000,000
Reporting deadline: Quarterly
Filing deadline: Within one month following end of reporting period
Taxable supplies: Less than $1,500,001
Reporting deadline: Annually
Filing and payment deadline: For individuals with December 31 fiscal year ends: June 15 of the following year
Payment deadline: April 30th
For other annual filers: Within three months following the end of the reporting period
GST/HST quarterly instalments are required for annual filers whose GST/HST payable for the preceding reporting period is $3,000 or more
Sales tax interest and penalties
Interest
6% compounded daily.
Penalty
1% of amount owning + ((25% of 1%) x # of months overdue to a max of 12)
There can also be penalties for not keeping adequate records, not giving CRA access to records and not giving CRA information when requested.
Employee taxable benefits that are exempt from GST
- Automobile allowance
- Educational allowance for children
- Gifts, awards, and social events: in cash
- Group term life insurance premiums
- Interest-free and low-interest loans
- Overtime meal allowances
- Premiums for provincial health programs
- RRSP premiums
- Scholarships and bursaries
- Tuition fees
Residential real property GST rules
New residential property is subject to GST
Used residential property is NOT subject to GST
Purchaser of new real property can claim a rebate for a portion paid if they intend to live in the property for at least 12 months.
Same applies to landlords that will be renting for at least 12 months.
Commercial property is always GST applicable
What is the difference between zero-rated and exempt supplies
If a supplier sells zero-rates goods they are not required to collect GST but they still can claim ITC credits.
If a supplier sells exempt supplies they are not required to collect GST and they are unable to claim ITC’s
