How do I record expenses on a sales invoice. When recording HST on sale and expenses why does it net out. No ITC credit on HST paid

Hi there,

Welcome to the Community. Making sure you're recording your transactions the right way is a good exercise for preventing errors in your books. 

I recommend contacting an accounting professional to get more info on this. If you're not in contact with one, I encourage you to search for one on our website using this link here. Doing this will help prevent any future discrepancies. Let me know if you have other questions. I'm here to help. 

I am bumping this question up as I have the same issue within QBO. 

I  need to include an expense on an invoice; the reasoning is that in the trucking industry, the "customers" provide fuel to the truckers and they deduct the fuel on the truckers pay.  That fuel has to be recorded as an expenses and the ITC needs to be tracked and reported on the period HST remittances.  

I fail to see how to do such a transaction in QBO without netting the HST between the income and the expense (which is a big NO with CRA). 

Example :
Client hauled for 15,000 + HST and was deducted 2,250 for fuel + HST

The entry should look like

A/R                       DT  14,.407.50

Fuel Expense      DT 2,250.00

HST ON Purch    DT 292.50

Sales                                            CT  15,000.00

HST on Sales                              CT 1,950.00

QBO will only do the following (unless I am mistaken) which is wrong.

A/R                       DT  14,407.50

Fuel Expense      DT 2,250.00

Sales                                            CT  15,000.00

HST on Sales                              CT 1,657.50

This is ultimately a single transaction that needs to go through the sales module as my client needs to track the HST on sales, HST on purchases and will also be receiving the net amount, so I can't enter an sales invoices and a bill to pay.

Thanks for chiming in on this. It's vital you're able to enter your transactions the way you'd like to enter them. To ensure accuracy, I suggest reaching out to your accountant for expert advice. If you need to reach out to a QuickBooks certified accounting professional, you can search for one on our site using this link here. I'll also leave this question open in the Community so other members can chime in and share their advice. In the meantime, check out this helpful resource here. Feel free to ask questions below, I got your back. 

Thanks for the reply JamesM. 

I am a Chartered Professional Account and fully understand the journal entry that needs to be produced; my question pertains to QBO's functionalities and not about the actual accounting/posting. 

Can QBO post an expense and track the HST on Purchases that populates into QBO's tax module on a Sales Invoice or is that impossible?

I hear you on this. With QuickBooks, you can post an expense and track the HST on purchases. You'll have to make sure the HST is connected to the invoice or expense and it will be recorded in the tax module. Are you working with billable expenses? 

I don't work with billable expenses, and I'm not quite sure it would be appropriate in this situation either as I am not entering an expense through the bills/expense feature which would be billed.  I'll use the following terms to try to simplify the scenario (Trucker would be my client who is using QBO and Broker would be the "customer" that is being invoiced).

What happens is that Trucker hauls products for Broker, and Broker supplies a fuel pump that Trucker uses.  Trucker gets paid by Broker twice a month.  Broker determines the amounts that Trucker earned based on their scaling equipment (Trucker doesn't submit an invoice to Broker) and the amount that Trucker has used in fuel is summarized.  Broker submits a summary of both the fuel expense and the hauling income to Trucker and pays Trucker the NET amount of both transactions. 

Ideally, I need to be able to track that information in a single invoice entry in QBO, where I will track all of the following information
a) the income (no problem there)

b) the hst on sales (no problem there)

c) the fuel expense (no problem there)

d) the hst on purchases from the fuel summary (this is what I can't get to work)

I currently have created a temporary GL account for the transit of the expense.

The first entry would be the customer invoice that tracks the net amount receivable.  

a) Sales $1,000 + HST
b) Temporary Clearing Account  -$500

The second entry is a general journal entry that redistributes the temporary account.

Fuel Expense DT 500  (Inclusive of HST against HST on Purchases)

Temporary Account  CT 500

I dislike this workaround as it creates the need for 2 entries, increasing the risk of error and workload.

I see what you're saying. I can see the importance of tracking sales tax on purchases as an expense. At this time, I'd recommend using the workaround you've described above. I also recommend sending this as feedback to our product developers so they can include the method which works best for you. To send feedback, click the Gear icon and look for Feedback. Great product ideas are based on the valuable feedback we get from users like you. 

I agree with you since I am having the same problem. I cannot deduct an expense (management fees) from the sales invoice. I am looking for the answer from Quickbooks, however, it seems that they have not worked with this function.

Hi Trang Nguyen 1,
 

Thanks for joining this thread. It's important that you track your taxes to ensure that the right amount is reported to the CRA. I'd encourage you to refer to the workaround mentioned above to complete this task. If you'd like to include the option to apply the HST expense on the invoice, I'd recommend that you send us Feedback by clicking on the Gear icon at the top. This is sent to our Development Team to consider for future updates. 
 

Let me know if you have any questions, I'll be happy to help.

I have the same issue with a trucking company invoice.  ANd didn't realize it was not recording correct on the HST reports until  now i have received a discrepancy letter from CRA.  I was recording the sale on the sale receipt and entering a negative for the fuel that was deducted but this is not recording correctly since 2020 which i have NOT REALIZED. Maybe even before but i haven't looked back that far yet.  What a nightmare.  Did your find a solution.

I have the same issue with a trucking company invoice.  And didn't realise it was not recording correct on the HST reports until  now i have received a discrepancy letter from CRA.  I was recording the sale on the sale receipt and entering a negative for the fuel that was deducted but this is not recording correctly since 2020 which i have NOT REALIZED. Maybe even before but i haven't looked back that far yet.  What a nightmare.  Did your find a solution?

Having the same issue here but on QBDT. So far what I am doing is pulling a report on the CGS GST and moving it to the ITC's via JE since that is where they should be going in the first place. I am going to continue playing around with sales tax codes and see if I can link a new code on cost of sales. 

There are so many instances where it is necessary to have deductions appear on invoices such as referral fees and many examples in the agriculture industry (cattle sale deductions, grain sale deductions, consignment fees for equipment etc) 

I found this thread as I was looking for a better way to record our crop income with our drying and check off fees from the grain elevator deducted from that income. Our accountants have it set up a certain way which gets the job done but has some drawbacks which was my reason to see how other people are entering these types of payments. The way they have it set up for us is that when I receive a payment for our crop income I record it as an invoice first. I enter the total crop income (for us this is non-taxable), in the "account" section of that line item I use an income account called Farming. To enter the drying and check off fees I enter that as another line item on the invoice using an expense account called Farming - Expense, I enter the expense in the "rate" section as a negative number, this line item of the invoice does have HST (we're in Ontario) applied to it. At the bottom of the invoice in the area where it totals everything the HST section is shown as a negative number with the total amount mirroring the total amount I was paid from the grain elevator. From there I apply my payment received to that invoice and then can deposit the amount into the appropriate account. Upon reading this thread I became worried that doing it this way we might not have been entering the HST paid properly and thus not claiming it on our quarterly HST filings. I took a look at our GL and it does appear that doing it this way is recording the tax paid correctly. The drawbacks to this method is that although the invoice you have created appears to be paid in the customer center and on the invoice itself, when you go to the apply payments window to this customer account it shows that all invoices are outstanding, and when you "Assess Finance Charges" this account always shows up with a balance owing and thus the software always wants to add finance charges to it. Although those small details bother me (perfectionist over here), this method is working for us and I can enter the payment in less than 5 minutes. I thought I would share in case it helps someone coming across the same issues. If anyone has come up with a better way that is just as easy to enter, please share!

We're having the same problem but with livestock settlements.  And we're using Quickbooks desktop, but it's the same issue.  We receive $X for the livestock and then expenses like trucking & levies are deducted from it.  We need a way to record the HST paid on the expenses to be recorded as ITC's paid on purchases (there is no HST on livestock sales).  I see no way to create a sales item for this as when I try, error messages pop up.  We are currently recording it as a debit to HST collected on sales and then do a Sales Tax Adjustment journal entry quarterly (when we file HST) to reallocate it.  Since this thread is older and Quickbooks has stopped replying to it, it doesn't seem that they are interested in fixing this problem.

The only  way I could get it to work was a 2 step process. I enter the sale for the work but the fuel portion I select a clearing account I have setup. So the fuel and hst is posted to the clearing account. Then I do a journal entry to remove the amount from clearing account and debit to fuel and select the hst. It’s the only way it shows on the hst report correct