baf SALES TAX AND GOODS AND SERVICES TAX

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					SALES TAX AND GOODS AND SERVICES TAX


8% Sales tax (P.S.T.) is provincial (Ontario)
6% Goods and Services tax (G.S.T.) is federal

GST:
 Manufacturers, wholesalers and retailers of both merchandise
  and services must add tax to the selling price (SP) of each item
  sold, yet the government receives only 6% of the final SP
 Exemptions—groceries, prescription drugs, health services,
  educational services, etc.
 Businesses are registered with Revenue Canada to collect GST,
  then forward it to the federal gov’t
 The business sends the gov’t only the difference between the
  GST collected and the GST paid to other businesses when
  buying goods/services
 The amount of GST paid is called the input tax credit
 See page 363 chart in text—mountain bike example

PST:
 All provinces impose a sales tax on retail sales (8% Ontario)
 The rate is determined by the province and may change (i.e. at
  one time Alberta had 0% tax)
 The retailer is issued a permit or licence, then remits to the gov’t
 Usually this is done each month for the previous month’s
  collection
 Exemptions—in cases where the tax would be collected twice
  i.e. paper purchased by a printer to produce greeting cards
 Calculation—percentage of base price (Ontario) or percentage
  of base price plus GST (see page 367 text)
TAX PAYABLE ACCOUNTS:
 PST Payable ___________________ account
 GST Payable ___________________ account
 GST Refundable ______________________ account
(see page 368 text)

 To collect PST:



 To remit PST:



 Purchase of merchandise for resale (i.e. mountain bike):




 To remit GST: GST collected - GST paid or

GST _____________________ - GST ______________________
= GST due to gov’t

 GST Refundable is a contra liability account because it
  decreases liabilities

OPTIONAL GST SYSTEM FOR SMALL BUSINESS:
 “quick method” i.e. multiply sales by a specified percentage
 avoids input tax credits, and recording of collection/payment
CASH DISCOUNTS:
 based on the value of the merchandise or on merchandise plus
  taxes?
 The latter is generally accepted

				
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posted:11/10/2011
language:English
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