Taxes (HST, GST and PST) - Sage 50 Flashcards
HST
Harmonized Sales Tax (13% is used in this textbook)
- blended with some provincial taxes at different rates.
- is levied by the federal government of Canada through the CRA, customs and Revenue Agency, on most goods and services in Canada.
GST
Goods and Services Tax (5%)
is levied by the federal government of Canada through the CRA, customs and Revenue Agency, on most goods and services in Canada.
GST/HST taxable at a zero rate
(zero-rated; i.e., the current GST/HST rate on these goods or services is zero percent; therefore, GST/HST is not collected or paid).
Examples: basic groceries-milk break & vegetables; agriculture products-grain and raw wool; prescription drugs
Companies claim the GST/HST that they pay or is payable on purchases.
Tax Exempt
not subject to tax by federal or state governments (GST/HST is not calculated on these goods.
Examples: child care, most health, legal aid services, educational services (certificate or diploma)…
Tax codes used in this text are:
HST - Harmonized at 13%
HI - Harmonized at 8%
No Tax - Used on some items (paying HST or GST to the Receiver General, drawings or withdrawals the the owner, etc.).
PST
Provincial Sales Tax; provinces (except Alberta) levy a provincial sales tax, which is included in the HST, and may include or exclude the GST in the price on which the PST is calculated.
In this textbook the companies exclude the GST in calculating the PST.
PST may also be called Retail Sales Tax (RST).
HST or GST Charged on Sales
HST or GST on goods or services regardless of whether they are sold to a retail customer (customer) or to another company (merchandiser, wholesaler or service company).
The HST Charged on Sales or GST Charged on Sales is entered as a liability.
HST or GST Charged on Purchases
When a company buys goods for resale or for its own use, HST or GST is paid on the purchase price, regardless of whether or not the purchased item is intended for resale.
The HST Charged on Purchases or GST Charged on Purchases is entered as a contra-liability.
Regular Method on Recording HST or GST
the HST or GST is recorded on each sale and purchase.
At the end of the reporting period the business will either send the difference (more HST or GST collected than paid) or claim a refund (more paid than collected) to the Receiver General of Canada.
(reported on a monthly, quarterly or annual basis)
Quick Method on Recording HST or GST
calculates the HST or GST to be paid based on a rate of 1-5 percent of net sales.
Typical Examples: Grocery & convenience stores.
To Avoid Double Taxation
a business is allowed to deduct HST Charged on Purchases or GST Charged on Purchases from the HST Charged on Sales or GST Charged on Sales.
Registration
A business with annual sales of more than $30,000 in a single calendar quarter or in four consecutive quarters, which exceeds the small supplier limit, must register to collect the HST or GST. Registering will allow a business to recover any HST or GST paid on its purchases.
(optional for a business in which sales are less than $30,000).
HST or GST Paid to the Federal Government
HST/GST Paid on Purchases is subtracted from HST/GST Charged on Sales equals Payment to Receiver General or Refund.
(if paid on purchases is less than charged on sales the business owes the difference)
PST Paid to the Federal Government
the business will determine the amounts in the PST account at the report date, this amount is due to the provincial government.
