Background
There are a few types of different sales tax to consider when talking about Canadian sales tax.
Many provinces collect what is known as PST (provincial sales tax) as well as GST (goods and services tax). Other provinces collect what is known as HST (harmonized sales tax) which is a harmonization of GST and PST. Others still collect only GST. Far more information is available on the CRA's site.
Setup
For this article we're going to provide two different Setup scenarios (one using PST + GST and one using HST) but this can be extended and modified to work for your situation. It's also possible to get far more detailed and there is a separate article for those who wish to look into more complicated scenarios.
Setting up for HST Reporting
Go to Lists > Tax Codes from the menu bar at the top of the screen
Click on the arrow (double-arrow) next to HST
If you have never touched this section or your accounts list you'll notice that the linked account for Tax Collected reads "GST Collected" and then linked account for Tax Paid reads "GST Paid."
While there's no harm in leaving these as is - many people would rather have these linked to accounts identified as HST accounts. You can skip to step 5 if you do not want to change the accounts. if you would like to change them you have two options:
Option 1: Change the account names from GST to HST (if you don't have to collect GST at all this is a good option). Go to Lists > Accounts and click on the double arrow next to GST Collected. Change the name to HST Collected and click okay. Do the same for GST Paid
Option 2: Create new accounts:
Go to Lists > Accounts and click on the Liabilities tab
Scroll down until you see the bold header Tax Liabilities
Click the New button below the list of accounts
Enter an available account number in the Tax Liabilities section (ie: 2-1302) and hit tab
Enter in the name HST Collected
Click okay
Repeat this to create HST Paid
Go back to the Lists > Tax Codes > HST
Change the accounts for Tax Collected and Tax Paid to the ones you just created
Create an account for HST Remittance: Click Lists > Accounts from the menu bar at the top of the screen
Click on the Liabilities tab
Scroll down until you see the Tax Liabilities header account
Click the new button to create a new account
Enter in a free account number (preferably directly above the two accounts you have linked to the HST Tax Code) and hit tab
Type in the Account Name as HST Remittance
Setting up for GST and PST Reporting
Go to Lists > Tax Codes
Click on the arrow (double-arrow) next to PST
Adjust the PST rate for your province if necessary and confirm that the Linked Account for Tax Collected is PST Collected
Click Ok and then close the Tax Code window
Go to Lists > Accounts
Click on the Liabilities tab
Scroll down until you see the Tax Liabilities header account
Click the new button to create a new account
Enter in a free account number (preferably directly above the two GST accounts) and hit tab
Type in the Account Name as GST Remittance
Finding Out How Much Tax You've Collected and Paid
Once it's time for you to report on and remit your Sales Tax (this could be annually, quarterly, or monthly depending on the volume of business) you can run the GST and PST Return report to find out what you've collected and paid out. This report works for both those who are using GST and PST or those using HST (those using HST just have to make note that HST will be considered GST on this report).
How to do this:
Go to Reports > Index to Reports from the menu bar at the top of the screen
Click on the Sales Tax tab
Select the GST and PST Return report and click "Customize"
Enter the date range you need to report for and click display
PLEASE NOTE: Sales Tax Remittance payments do not show on any Sales Tax reports. These reports only show sales tax collected on invoices and paid on bills, not the Spend Money remittance payments to the government. You can run an Account Transactions or Trial Balance Detail report for the tax accounts.
Paying Sales Tax (Remitting) to the Government
Once you've run the GST and PST Return report you can use that to make the entries needed to clean up your accounting and can then pay the government.
HST Remittance
This is a fairly straightforward process and only requires creating two transactions. First we create a journal entry to move the money to the HST Remitted account:
Go to the Accounts module
Click on Record Journal Entry
Date the entry for the end of the reporting period (ie: July 31, 2016 for monthly filers)
Enter a memo name (ie: July Remittance)
Using your PST and GST report as reference add the following line items:
HST Collected: Debit the amount of Sales Tax collect
HST Paid: Credit the amount of HST Paid
HST Remitted: Enter the amount that will put you in balance (the difference between the two) - if you've collected more then you've paid this will be a credit, if you've paid more then you've collected this will be a debit.
Record the entry
Next we record either a spend money or receive money transaction depending on whether or not we owe the government or have a refund coming to us:
To Pay Money Owed:
Go to Banking
Click Spend Money
Choose the Bank Account you are paying from at the top left
Select the CRA as the card you are paying to
Enter the date of the payment and a check number if there is one (could be Check # E-File if you're paying electronically)
Enter the amount owed
Select the HST Remitted Account in the allocation section (below the check)
To Receive a Refund:
Go to Banking
Click Receive Money
Choose the Bank Account you are going to deposit to in the upper left
Enter in the date of the deposit
Select the CRA card
Enter in the amount they refunded you
Select the HST Remitted Account in the allocation section (below the check)
Record the entry
GST and PST Remittance
GST and PST Remittance requires slightly more work because you actually have to remit twice - once for GST and once for PST.
Step One: GST
Go to the Accounts module
Click on Record Journal Entry
Date the entry for the end of the reporting period (ie: July 31, 2016 for monthly filers)
Enter a memo name (ie: July Remittance)
Using your PST and GST report as reference add the following line items:
GST Collected:Debit the amount of sales tax collected
GST Paid: Credit the amount of GST Paid
GST Remitted: Enter the amount that will put you in balance (the difference between the two) - if you've collected more then you've paid this will be a credit, if you've paid more then you've collected this will be a debit.
Record the entry
Next we record either a spend money or receive money transaction depending on whether or not we owe the government or have a refund coming to us:
To Pay Money Owed:
Go to Banking
Click Spend Money
Choose the Bank Account you are paying from at the top left
Select the CRA as the card you are paying to
Enter the date of the payment and a check number if there is one (could be Check # E-File if you're paying electronically)
Enter the amount owed
Select the GST Remitted Account in the allocation section (below the check)
Record the entry
To Receive a Refund:
Go to Banking
Click Receive Money
Choose the Bank Account you are going to deposit to in the upper left
Enter in the date of the deposit
Select the CRA card
Enter in the amount they refunded you
Select the GST Remitted Account in the allocation section (below the check)
Step Two: PST
PST doesn't require a journal entry as you do not have to consider PST paid on purchases - you are not able to deduct this from the amount you collected.
To Pay Money Owed:
Use your PST and GST report as reference looking for the figure under PST collected
Go to Banking
Click Spend Money
Choose the Bank Account you are paying from at the top left
Select the Provincial Government card as the card you are paying to
Enter the date of the payment and a check number if there is one (could be Check # E-File if you're paying electronically)
Enter the amount owed
Select the PST Collected Account in the allocation section (below the check)
Record the entry