In order to calculate your net sales tax payable, you will simply subtract the GST/HST ITCs from GST/HST collected. Special rules apply when calculating ITCs on meals and entertainment, motor vehicle and home office expenses.
Still with us? Here is a real life example of how a consultant might calculate their sales taxes:
Adam is a consultant based out of Ontario and his taxable sales are $10,000. The GST/HST he’s collected on sales is $1,300.
Adam also incurred the following expenses:
- Office Supplies of $1,000 plus GST/HST of $113
- Meals of $100 plus $13 of GST/HST
- Motor vehicle Fuel of $300 plus $39 of GST/HST
Assuming that Adam is using his vehicle 40% for business use, his net GST/HST remittance would be calculated as:
|GST/HST Paid on Expenses||$||Deductible %||$ Deductible|
|Meals and Entertainment||13.00||x||50%||6.50|
|Motor Vehicle Fuel||39.00||x||40%||15.60|
|Total GST/HST ITCs||(135.10)|
|Net GST/HST due||$1,164.90|
Any GST/HST collected, ITCs and net payable or refund should be reported on the GST/HST tax return. Moreover, any GST/HST balance due should be paid to the Canada Revenue Agency by the payment due date.
Note that if you are registered for QST, you are required to file a separate QST return and pay any QST owing to Revenue Quebec. Also, if registered for PST in BC, SK or MB you are required to file a separate PST return and pay any PST owing to respective provincial ministries.
How can Sorted help?
Once you set up your tax profile in Sorted and categorize your transactions, we’ll do the rest.
Sorted will auto calculate sales taxes collected, ITCs, and the net sales tax payable (or refund) along with your expected payment and filing date. For more details on filing dates and deadlines, read our post on the freelancers guide to sales taxes in Canada.
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Nikhil Aggarwal is a CPA, CGA and a Tax expert. He strongly believes in transforming obstacles into opportunities and loves working with businesses, entrepreneurs and individuals. He has over 10 years of experience in accounting, taxation and technology. He has a proven track record of delighting the clients by finding over $20 million in tax savings. Nikhil has also completed Canadian In-depth Tax Course, which is the most comprehensive tax training program in Canada.