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How to set up sales taxes

Created on  | Last modified on 

Summary

How to set up sales taxes in Sage Accounting.

Description

  • Select the taxes that are applicable to your business
  • Enter your tax registration numbers
  • Enable tax rate selections in transactions
  • Manage tax rates
  • Set up for tax installment payments or ITCs/ITRs

Resolution

▼Open the sales tax settings page

Go to Settings, Business settings, Financial settings, Sales taxes

▼Understanding sales tax types

Goods and Services Tax (GST)

GST is a federal tax on Canadian goods and services and is part of HST in applicable provinces. It applies in New Brunswick, Ontario, Prince Edward Island, and Newfoundland and Labrador.

Provincial Sales Tax (PST)

PST applies in British Columbia, Saskatchewan, and Manitoba as RST.

Harmonized Sales Tax (HST)

HST combines GST and PST before remittance to the Canada Revenue Agency (CRA). It applies in New Brunswick, Ontario, Prince Edward Island, and Newfoundland and Labrador.

Québec Sales Tax (QST)

QST applies in Québec and replaces HST or PST in other provinces. Revenu Québec administers QST.

 NOTE: Alberta, Nunavut and Yukon, and the Northwest Territories collect only GST.

Preparing for tax type setup

Businesses must comply with place-of-supply rules and eligibility requirements. If selling across Canada, ensure all necessary registrations are complete and tax numbers are available before setup. Registered tax types appear in selection lists for sales and expense transactions.

Setting up tax types

In the Sales Tax Settings list, select 'I will not collect tax here' for unneeded tax types. For required tax types, enter registration numbers and set compliance reporting deadlines in the Tax Return Frequency field.

▼Setting a default ITC/ITR percentage

GST/HST and QST registered businesses can claim Input Tax Credits (ITCs) or Input Tax Refunds. Some expenses, such as meals and entertainment, are partially recoverable. Set a default percentage in Sales Tax Settings and adjust the recoverable amounts per transaction.

Indicate which expense ledger accounts have ITCs/ITRs in your Chart of Accounts. See Setting up partially recoverable taxes for more details.

▼Tax instalments

 NOTE: Enter a GST/HST or QST registration number to access this feature.

Registered businesses can submit tax payments in instalments to CRA or Revenu Québec. Sage Accounting tracks instalment totals on tax returns.
Before setup, determine which ledger accounts will hold payments. Create ledger accounts in the Chart of Accounts before enabling the feature. If paying both CRA and Revenu Québec, create separate accounts for each tax type.

Setting up tax instalments

In the Tax Instalments section, select 'I pay GST/HST in instalments' or 'I pay QST in instalments' to enable the feature. Select or create ledger accounts for each tax type.
After setup, tax instalment accounts appear in selection lists for transactions.

Entering instalment payments

Select the correct tax instalment account in the Ledger Account field.

Reviewing the total instalments on tax returns

Posted payments add cumulatively to the corresponding tax return box:

  • GST/HST return: Box 110
  • QST return: Box 210

To review the totals, go to Reports, Tax Returns. Open or create a GST/HST or QST return and check the relevant box.

Adjusting the instalments total

To adjust, click the total to open the Instalment Adjustment. Enter the correct figure in Change figure to. The difference between this and the Calculated Figure appears to the right. Provide a reason and save the adjustment.

Default Account Type Effect Box
GST/HST instalment payments Debit Increases 110
GST/HST instalment payments Credit Decreases 110
QST instalment payments Debit Increases 210
QST instalment payments Credit Decreases 210
▼Including taxes in transactions

Sales transactions (invoices, credit notes, quotes, estimates, quick entries) apply tax rates based on the customer’s address.

  • For example, invoices for Yukon customers display GST rates

Expense transactions apply tax rates based on the business address, as you pay taxes on the purchase. Sometimes, vendor location tax rates can apply. Select the correct tax area in the Tax rate field when needed. This option is also available for Other Receipts and Other Payments.

 

Related Solutions

Setting Up Tax Return Frequency to Enable Tax Return Generation