HOW TO SET UP TAX RATES FOR A CHARITY IN QBO TO SPLIT THE GST/HST ON SALES 60/40%

JULY 2019: SCREENSHOTS ARE OUT OF DATE AND WILL BE UPDATED SHORTLY. STAY TUNED!

“If your charity is a GST/HST registrant, you have to use a special net tax calculation for charities. When you use this calculation, you generally remit 60% of the GST/HST you charge and claim ITCs only on certain items, where all the conditions for claiming ITCs are met. In addition, you can claim the PSB rebate of the GST/HST paid or payable on your eligible purchases and expenses and for which you cannot claim ITCs, whether the GST/HST relates to your commercial activities or exempt activities.”

Source: https://www.canada.ca/en/revenue-agency/services/forms-publications/publications/rc4082-gst-hst-information-charities/gst-hst-information-charities.html#P283_24869

What does this mean? When you charge and collect tax on sales, you will remit 60% and keep 40% of the amount collected. And although you will only be claim ITCs on certain items (know the rules), you will be eligible for the PSB rebate, meaning you will receive a rebate for 50% of the GST or federal part of the HST paid on purchases.

See my other blog post HOW TO SET UP THE GST/HST PUBLIC SERVICE BODIES’ (PSB) REBATE IN QBO here.

Here’s how to set this up in QBO. We’re going to add two new tax rates, then a new tax group. I’m in a GST only province, so I’m going to set this up with the 5% GST in mind. You can modify this to work in different provinces by adjusting the percentages.

STEP ONE: ADD NEW TAX RATE

• Click on Taxes from the left navigation bar

• Click on Add tax in the upper right-hand corner

• Choose Tax rate

• Fill out as shown

• Click Save

STEP TWO: ADD NEW TAX RATE

• Click on Taxes from the left navigation bar
• Click on Add tax in the upper right-hand corner

• Choose Tax rate
• Fill out as shown

• Click Save

STEP THREE: ADD GROUP RATE

• Click on Taxes from the left navigation bar
• Click on Add tax in the upper right-hand corner

• Choose Group rate

• Fill out as shown

• Click Save

REVIEW YOUR WORK

TIP: You can inactivate (by toggling Off) the two tax rates you just added so that only the group rate appears for selection on transactions.

NOTES:

I always test these out first in the test drive file. Here’s the link: https://qbo.intuit.com/redir/testdrive_ca

Use names and descriptions for the tax rates and group rate that make sense to you. Just remember that the group rate cannot be edited.

Rules around charities can be complicated. Please check the CRA website for more information.