As many of our customers in Canada will already be acutely aware the Canadian Government has approved a change in the manner that businesses in British Columbia and Ontario tax their customers and if you’re buying or selling to individuals in these provinces you may be affected.
You may have heard of the coming “Harmonized Tax” which is also already in effect in other parts of the country. It is essentially a combination of the provincial tax which taxes the total of your principal sale. Although the HST comes into effect on July 1, 2010 in both British Columbia and Ontario, it is important to consider changes you will need to make now, especially if you’re business tends to pre-sell to its customers (for example a painter who is pre-booking services to occur after the July 1st deadline).
What sales tax you pay on an order is determined by where your customer is and not where your business is located. Please visit the Canadian Government website for further (and more specific) information regarding how to change your taxation on sales orders etc. at this address: http://www.cra-arc.gc.ca/gsthst/
As to a basic overview of the tax changes, sales or services sold between May 1 and July 1, 2010 will need to be reported to the government by the business doing the selling (when completing taxes) however whether your customer is charged according to the new or old tax scheme depends on a few factors.
Generally speaking, services and payments rendered before July 1st are subject to the previous taxing scheme while services rendered and paid for after the deadline should be charged according to the new scheme.
If you are having trouble determining whether your customer should be charged HST you might try using the chart below. In addition (and as mentioned above) please visit the Government website for more information and to assess your business.
Canada Revenue Agency. GI-056 Ontario and Britiansition to the Harmonized Sales Tax-Services. Canada Revenue Agency Website. http://www.cra-arc.gc.ca/E/pub/gi/gi-…. Published January, 2010. Accessed May 12, 2010.
Now that you have an understanding of the changes in the taxing system the easiest way to make changes to your inFlow setup is to enter an additional taxing scheme via the Company settings in the Main Menu.
1. Click Main Menu > Settings > General Settings
2. Select the “Pricing & Tax” window and click the “Edit Taxing Schemes” window.
3. The Taxing Schemes Window will pop up, allowing you to create a new taxing scheme
4. To enter the new tax simple type in the fields provided. In the case of HST in Ontario you would enter your information as follows:
As you can see from the example above, the previous taxing scheme had 5% GST and 8% PST. The two taxes were charged together however listed separately as some products (for instance many services) were not charged PST.
With the new HST taxing scheme, we find that there is only a primary tax listed and since there is no information in the secondary tax column, inFlow will not show a secondary tax (as evident from the example at right).
You can make the sales process easier by setting your default taxing scheme to whichever scheme you find you’re using most often (i.e. if you do a lot of presales you may want to switch your default now instead of waiting until July 1).
One final item to keep in mind: product tax information will override your company defaults so be sure to pay extra attention to your product settings and visit the revenue Canada for a comprehensive overview of how this change will effect your business.