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Senior Explorer ***

Do you charge hst when accepting deposits

We are a construction company that takes upfront deposits before we start a job.  So I make up a Sales Receipt for the 25% deposit.  Am I supposed to charge HST on the deposit, or wait until I do up a final invoice and subtract the deposit from the total?

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Best answer 03-11-2019

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Established Community Backer **

No, GSt is not collected on a deposit or prepayment. If u...

No, GSt is not collected on a deposit or prepayment. If unsure, check the CRA website for guidance.

QuickBooks Team

Re: when a Deposit is collected, there is no HST. HST is coll...

I'd like to provide how an estimate works, Diane18.

 

An estimate is a non-posting transaction. You create this when you give your customer a quote or proposal for the work you plan to do. After you're done with the work or if you're ready to bill your customer, you'll add the data from the estimate to an invoice.

 

Thus said, you're unable to record a deposit against an estimate. You can record it against the invoice. You shouldn't cancel the HST on the invoices since it won't calculate on the estimates.

 

I've got you articles for your reference: 

If you have further question, please leave a comment below. We'll get back to you as soon as we can. 

 

 

14 Comments
Established Community Backer **

No, GSt is not collected on a deposit or prepayment. If u...

No, GSt is not collected on a deposit or prepayment. If unsure, check the CRA website for guidance.

Established Community Backer **

Generally, sales tax is not charged on an initial deposit...

Generally, sales tax is not charged on an initial deposit or pre-payment. Sales  tax is, however, charged on subsequent Draws.

Senior Explorer ***

That's what I thought but wasn't sure.  Thanks

That's what I thought but wasn't sure.  Thanks
Not applicable

This is very helpful. I have a client who has a decoratin...

This is very helpful. I have a client who has a decorating business. She takes a 75% deposit which is higher than most. I feel like the HST should be charged on this? thoughts?
Senior Explorer ***

That is a large deposit.  I would make up an invoice with...

That is a large deposit.  I would make up an invoice with HST and deduct the 75% off the total - not the subtotal.  That's what I would do but I don't know if that's correct or not.
Established Community Backer **

That is NOT correct. What you should do is: when the job...

That is NOT correct. What you should do is: when the job is completed, create an invoice for the entire project, applying the correct sales Tax Item to the entire invoice. Then, apply the credit created by the  75% Deposit to the gross amount. that will leave you with a balance payable, including GST.
Not applicable

ok thanks for the information. This all came up when she...

ok thanks for the information. This all came up when she was working on her HST return. She files quarterly. From what I can gather from your responses, she shouldn't be charging/collecting the HST until the job is complete - and thus filing that HST in the quarter when the job is done, not when she takes the deposit. Is this correct?
Senior Explorer ***

To impossible - that makes more sense.  Thank you!

To impossible - that makes more sense.  Thank you!
Established Community Backer **

when a Deposit is collected, there is no HST. HST is coll...

when a Deposit is collected, there is no HST. HST is collected when an invoice is issued, regardless of whether the job is complete or not.
Senior Explorer ***

Re: when a Deposit is collected, there is no HST. HST is coll...

I must be doing something wrong then.  I always create an estimate which includes the HST.  When the client puts a 25% deposit down, I create an invoice and it gets deducted from the estimate but an invoice always calculates the HST so I'll have to cancel the HST on the invoices.  Or is there another way of recording a deposit against an estimate?

QuickBooks Team

Re: when a Deposit is collected, there is no HST. HST is coll...

I'd like to provide how an estimate works, Diane18.

 

An estimate is a non-posting transaction. You create this when you give your customer a quote or proposal for the work you plan to do. After you're done with the work or if you're ready to bill your customer, you'll add the data from the estimate to an invoice.

 

Thus said, you're unable to record a deposit against an estimate. You can record it against the invoice. You shouldn't cancel the HST on the invoices since it won't calculate on the estimates.

 

I've got you articles for your reference: 

If you have further question, please leave a comment below. We'll get back to you as soon as we can. 

 

 

Senior Explorer ***

Re: when a Deposit is collected, there is no HST. HST is coll...

Hi Kristine - We receive upfront deposits before invoicing.  I have to record the deposit so I open an invoice against the estimate for the amount of the deposit only.  I think what I'll have to do is create an invoice for the total of the estimate, then record the deposit against the invoice.  It looks like I have no need to create estimates. 

Thank you for your input.

j9
Not applicable

Re: Do you charge hst when accepting deposits

My problem:  We sell rental space and take deposits (sometimes many) before the actual rental date.  Rental charges are subject to HST which is not payable until the final payment.  I do not wish to pay for the tax in advance, as it is not due until the rental date.  What would be the best way to set this up?  I have tried to work through estimates AND through jobs.  In each instance, I create the estimate for the entire job, create an invoice each time and post the deposit to the charge and not the HST.  The FINAL payment clears the balance of the charge plus the HST.  Reporting is a problem as the invoice is not clear for the client AND it is impossible to access the accounts receivable balance owing.  HELP please.

Established Community Backer **

Re: Do you charge hst when accepting deposits

In your situation, Estimates don't appear to be practical.

 

This is what I would do:

 

First, add a Note to the Customer Profile indicating the Total Rental amount + Taxes.  Notes are displayed in the Customer Information screen.

 

Next, use the Receive Payment function to receive the Deposit (there can be only 1 deposit) and Pre-payments. Received from: the Customer, From Account: Accounts Receivable. This will create a credit (or multiple credits in the Customer Account. The Payments (Credits) are also displayed in the Customer Info screen.

 

When the Credits are equal to the $ amount calculated in the Notes, create the Customer Invoice for the full amount. Apply the Credits to clear the balance.