6.3 Taxes Chapter 6

Types of Taxes

Sales Taxes Accounting for taxes can be complex because of the government regulations.

Harmonized Sales Tax Harmonized Sales Tax (HST) is a percentage tax based on the price of goods or services sold to a consumer. The ________________.Harmonized means that the provincial & federal rates have been combined. All businesses with _______________________per year must register for HST. Each registrant is given a special Business Number that they use when submitting HST to the government.

History of the HST HST came into effect in Ontario on July 1 st, Prior to July 1 consumers were charged 8% PST & 5% GST separately. 8% PST was collected provincially 5% GST was collected federally Now HST is 13% and includes the ___ _____________________________ ____________________

What do we pay HST on? Go to the following website to see what items are charged HST.

HST requirements The Seller (Business) is charged with the responsibility of administering the tax. Their responsibilities include: 1. Calculate the tax and ______________of goods. 2. ___________from the customers 3. Accumulate the HST into a special account called ____________in the Liability section. 4. _____the accumulated sales tax _____ monthly, quarterly or annually depending on the company’s annual revenues.

Recording HST on a Cash Transaction The accounting entry to record a cash sale will now look like this: DRCR Bank$ Sales HST Payable The amount of tax can be read off the cash sales slip or POS summary.

Recording HST on a Sale on Account The accounting entry to record a sale on account will now look like this: DRCR A/R – Marathon Sports$ Sales HST Payable The amount of tax can be read off the sales invoice.

HST Receivable Paying HST– All businesses are entitled to recover the HST that they are charged by their suppliers. This HST paid is recorded in a contra (debit balance) liability account. DRCR Office Supplies648 HST Recoverable 84 Bank732

Tax Transaction Examples

Remitting HST to the Gov’t. Businesses are required to file a _________ monthly, quarterly or annually within one month following the end of their reporting period. At this point the business will clear their HST accounts.DRCR Apr 28 HST Payable HST Recoverable Bank HST remittance for the quarter ended Mar 31

HST Remittance Example The goal is to ________ out the HST Payable & HST Recoverable accounts. To do this, we need to _____________________account for the credit balance in that account. We also need to ______________________ account for the debit balance in that account.

HST on the Balance Sheet HST recoverable is recorded on the balance sheet as a ___________ account. It would look like this: Liabilities Accounts Payable HST Payable Less HST Recoverable Bank Loan Total Liabilities