How Will the New Harmonized Sales Tax Affect My Small Business?
The harmonized sales tax (HST) replaces the existing provincial sales taxes (PST) and the federal goods and services tax (GST) in B.C. beginning July 1, 2010. The HST will be applied on most supplies of goods and services made in B.C. at a rate of 12%, consisting of the 5% federal portion and a 7% provincial portion.
According to Gabrielle Loren, a Certified General Accountant and partner of North Vancouver’s accounting firm, Loren, Nancke & Company, the transition to HST for businesses currently charging GST & PST will actually be very easy and will result in a lot less paperwork in the future.
“The simplest way to explain the transition is that PST is no longer charged and the rate used to calculate the GST is simply increased on most accounting software programs, like QuickBooks or Simply Accounting, from 5% to 12%,” says Gabrielle.
Quick Method of accounting is a simplified accounting option available to help small businesses calculate their net tax for GST/HST purposes. For more information about Quick Method, visit the Canada Revenue Website.
Gabrielle, a seminar facilitator at Small Business BC, continues to say that on the purchase side of things, the transition will again be simple. “Right now a business records the cost of an item bought plus PST and then the GST paid is entered as a separate amount. Moving forward, businesses will only need to enter two amounts, the cost and the HST,” she explains.
Canada Revenue Agency confirms that you do not need to register for HST if you are already a GST registrant. As for new businesses, you will be required to register for HST is your sales exceed $30,000 annually.
What other accounting considerations should small businesses be aware of with the new HST? “As mentioned, the Quick method for HST is available for small businesses – meaning their sales are under $200,000 in a year – so they are able to do a simple calculation as opposed to breaking out the HST on every expenses and deducting that amount from the HST collected,” says Gabrielle.
Here are some considerations your small business may want to do before the HST comes to effect on July 1, 2010.
Update your point of sale, cost and accounting systems so your business is ready to implement the HST by July 1, 2010. Learn more on General Transition Rules.
- Ensure you are aware of what taxes you need to be charging when. There are some services that did not charge PST but will now charge HST. Learn more about the details on when to charge HST or just GST, and about how your business can transition from PST to HST.
- Understand the HST invoicing requirements to inform customers when they make their purchases.
- Attend informational seminars by Canada Revenue Agency to learn how your business can transition to HST. May 26, & June 16, 2010 from 9am – 12pm at Small Business BC.
About The Author
Gabrielle Loren is a Certified General Accountant and partner with Loren, Nancke & Company. She was employed by Revenue Canada Taxation for 8 years; 4 of which were completed in the audit division. Gabrielle started as a home-based accounting practice in 1989 with a handful of clients in varying industries. Over the past 20 years this client base has grown in both size and industries and evolved into Loren & Company in 1997 and then to Loren, Nancke & Company in 2007.
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