 Tax dollars generated from business transactions

1. Tax dollars are charged to the buyer of goods 2. The tax dollars are collected by the seller and recorded in a separate liability account 3. The tax dollars rightfully belong to the government 4. The seller sends the tax dollars to the government at appoint times

 in Canada is commonly called Provincial Sales Tax (PST) because it is a tax charged by some provincial governments. The tax is calculated as a percentage of the price of a good and is paid by the consumer

 Harmonized sales Tax- 13%, July 1, 2010  Percentage tax based on price of goods/ services sold to consumer  Used by government to collect revenue to spend on services  2008  PST: 8%, GST: 5%

 The Seller or Vendor – is responsible for administering the HST and remitting it to the Federal Government, which includes: › Calculating the taxes (PST & GST) + adding it into the price of goods / services › Collecting tax from customers + remitting (to pay) to levels of government

 Bank (cash sales) or A/R  Sales Invoice › Revenue › HST Payable (13%)  liability account to accumulate tax.

 Is responsible for accounting for HST on purchases related to the operations of the business and by submitting the Input Tax Credit for the appropriate refund

“ Contra liability” account used to recover taxes paid on purchases for operating business complete “input tax credit” for refund of HST (DR)  Assets/ Expense  HST Recoverable › Bank or A/P Cheque Copy Purchase Invoice

 Small business pays (remits) annually  Mid-size business remits quarterly (3 months)  Large business remits by the 15 th the following month

Sales to Customer Tax Paid on Purchase Remittance  HST Payable – Recoverable = 39 – 26 = 13 HST RECOVERABLE HST PAYABLE

DRCR HST Payable 39 HST Recoverable26 Cash13 To record HST Remittance

Sales to Customer Tax Paid on Purchase Refund  HST Recoverable > Payable = 39 – 26 = 13 HST RECOVERABLE HST PAYABLE

DRCR HST Payable 26 Cash13 HST Recoverable39 To record HST Refund