Your net tax is the amount of sales taxes your business owes to the Canada Revenue Agency (CRA). This tax shows how much you should pay to the CRA over a particular tax period.
If you sell taxable goods and services, you may need to remit goods and services tax or harmonized sales tax to the CRA. However, you may claim an input tax credit for the GST/HST you pay on business expenses. The input tax occurs when your business pays sales taxes on goods or services you need to run your business, such as supplies. Your net tax is the difference between these two amounts.
Calculating Your Net Tax
To calculate net tax for quarterly or annual GST/HST returns, you should take the following steps:
- Add up all the GST/HST you collected over the reporting period.
- Determine how much GST/HST you paid on business purchases.
- Subtract what you collected from what you paid.
- The difference is your net tax and the amount you should submit to the CRA every quarter or year.
Using the HST Quick Method Calculator
If your business makes more than $400,000 annually in taxable supplies, you can opt to use the quick method calculator for figuring your net tax for HST or GST. When using this calculation, you only need to know how much tax you collected over a period and apply a percentage to that amount. The resulting calculation represents the amount you need to remit to the CRA. The actual percentage to use varies from province to province, but the quick method reflects a reasonable estimate of the result you get from using the regular calculation. If you choose to use the quick method, you must do so for at least one full year.
Keeping accurate sales, revenue, and income records make calculating your net tax easier. This comes in handy when you file your annual taxes as you seek to get the most deductions as possible. Accurate records also reduce the risk of a government audit.
Handling your net tax payments is just one of the many things on your plate as a small business owner. QuickBooks Online can help you maximize your tax deductions. Keep more of what you earn today.