Sales Tax

Sales Tax

• HST is a tax on the sale of most goods and/or services
• It is a way for the government to raise money
• HST is 13% of the purchase price (Ontario)
• HST Payable is a liability (credit) account
• If a business purchases something, it is entitled to recover the HST
• HST Recoverable is a contra liability (debit) account
• Add the end of a period, you would have to pay the government if your Payable is higher than your Recoverable
• If your Recoverable is higher than your payable, then the government would owe you money

Example

Custodial Services sold some office cleaning services to M. Meher.  The service cost $1500.00 plus $195.00 HST for a total of $1695.00.

In Journal of Seller (Custodial Services)

Bank                                        1695.00
   Sales/Revenue                                              1500.00
   HST Payable                                                  195.00
Sales of services

In Journal of Purchaser (M. Meher)

Office Cleaning Expense                    1500.00
HST Recoverable                                  195.00
            Bank                                                    1695.00
Office Cleaning

HST on the Balance Sheet

Since all of these accounts are a form of liabilities, they will all appear in the liabilities section of the balance sheet

Company Name
Balance Sheet
Date, Year

Liabilities
Accounts Payable			$  5,634.90
HST Payable		$   2,309.65
Less HST Recoverable		1,567.90	741.75
Bank Loan			2,500.00
Total Liabilities			8,876.65

Remitting HST to the government

• Frequency of remittance is based on size of business, but is usually monthly or quarterly.
• Businesses must register with the CRA (Canada Revenue Agency) and filing is normally done electronically.

Example 1:  Paying the HST from the previous month, Payable 2309.65 and Recoverable 1567.90.

HST Payable                           2309.65
            HST Recoverable                                            1567.90
            Bank                                                                  741.75
Cheque #456 for HST payable for the month of August

If the transaction say HST is included, just multiply the total by .115 to find out the amount of HST included on the bill.