How Do I Record Part Recoverable Sales Tax on Expenses?

In Canada, sales taxes on certain expenses are only part recoverable. This means that business owners can only claim part of the sales tax paid for these expenses as Input Tax Credits (ITCs).

EXAMPLE: Sales taxes paid on meal and entertainment expenses are generally 50% reimbursable. 

Sage Accounting allows you to account for these cases using your Chart of Accounts setup.

To set up part recoverable taxes for a certain category of expenses:

• Click Settings
• Click Chart of Accounts
• Select an expense account
• Check Transactions posted to this account have part recoverable taxes
• Verify the percentage recoverable and adjust if needed (This default for all part recoverable accounts is set under Settings > Sales Tax Settings). 
• Select a Non-recoverable Tax Ledger Account where the non-reclaimable portion of the tax paid will be posted
• Click Save

Transactions posted to this account will automatically account for the part recoverable rules posting the reclaimable percentage to an ITC account and the non-reclaimable percentage to the Non-recoverable Tax Ledger Account.