Unit 4

Question 1

Sales Tax

Answer 1

Charged on goods and services

Question 2

Income Tax

Answer 2

Charged on the earnings of a person when they work

Question 3

Tariffs

Answer 3

Charged to countries who import goods

Question 4

What does PST, GST and HST stand for?

Answer 4

1) Provincial Sales Tax
2) Goods & Services Tax
3) Harmonized Sales Tax

Question 5

Prior to 2010, Ontario had 2 Sales Taxes:

Answer 5

PST (8%)
GST (5%) - collected by federal gov’t

Question 6

After 2010, PST and GST was replaced by:

Answer 6

HST (13%) - combined PST and GST

The federal government collects HST and gives the provinces their share of the tax dollars.

Question 7

Why did the government decide to replace PST and GST with HST?

Answer 7

More efficient to have one tax collected than two.

Question 8

Which 4 provinces/territories collect ONLY GST?

Answer 8

• Northwest Territories
• Yukon
• Nunavut
• Alberta

Question 9

Which 3 provinces collect PST and GST?

Answer 9

• Saskatchewan
• Manitoba
• British Columbia

Question 10

Which 5 provinces collect HST?

Answer 10

• Ontario
• New Brunswick
• Newfoundland & Labrador
• P.E.I.
• Nova Scotia

Question 11

In July 2010, BC had HST. When did it change back to PST & GST?

Answer 11

2013

Question 12

What does Quebec call their PST?

Answer 12

Quebec Sales Tax

Question 13

T or F: Tax rates for HST & PST may be different for each province

Answer 13

True

Question 14

T or F: Provinces & territories that do not collect HST also do not need to collect GST

Answer 14

False

Question 15

T or F: ALL provinces & territories charge GST (5%) in effect

Answer 15

True

Provinces & territories that do not charge GST DO charge HST, which combines GST & PST

Question 16

When is VAT charged?

Answer 16

At each stage of the supply chain

Question 17

VAT is a consumption tax. What does this mean?

Answer 17

Charged when someone spends money on goods/services

Question 18

The government allows companies to get a tax credit for the VAT it paid to the previous seller. What does this mean?

Answer 18

They get back the HST already paid

The GST paid to other business is subtracted from the GST collected from customers

Question 19

What does Net Vat Collected show?

Answer 19

The amount of VAT that is remitted (sent) to the government by each organization in the supply chain

Question 20

Who pays ALL of the VAT?

Answer 20

The final customer (does not get a tax credit because he/she was not taxed at the selling stage)

Question 21

Businesses can receive a tax credit for operational expenses. Why?

Answer 21

To encourage revenue

Question 22

What are the 2 accounts used to record transactions involving HST?

Answer 22

1) HST Payable (when a business sells G + S)
2) HST Recoverable (when a business buys G + S)

Question 23

What does HST Payable record?

Answer 23

Amounts the company owes the gov’t

Question 24

What does HST Recoverable record?

Answer 24

Records the amount a company can recover from the government in the form of a tax credit

Question 25

Why is HST Payable a liability account?

Answer 25

Because the business owes the government these tax dollars.

Question 26

How and how often does a business remit HST to the government

Answer 26

Writes a cheque to the Receiver General of Canada at certain times of the year

Question 27

HST Remitted =

Answer 27

HST Payable - HST Recoverable

Question 28

Why is the HST Payable account debited when remitting HST to the gov’t?

Answer 28

Because the company no longer owes the gov’t this money

Question 29

Why is the HST Recoverable account debited when remitting HST to the gov’t?

Answer 29

The Tax Credit is reduced to zero.