@ewhiteway wrote: wrote:
Ok - (BC) PST is a beast (man do I wish we had kept HST) - but I don't think quickbooks is doing it right.
(these examples assume the QB user is both PST and GST registered)
Example 1: I buy something for $100 with my PST Number so I only pay 5% GST - Mark as billable to a customer. Now when I bill to my customer the item comes up as $100 with GST only. The Item's tax code should determine the taxes at time of sale (not the taxes at time of purchase). ALL items sold by someone who is PST registered, are required to be sold with PST (only a few services are PST exempt). It would be better to have PST charged as default on everything. With the current QB method PST is manual, and forgetting to charge it puts the lability on the business. (BC gov could come back and make you pay it all).
(This example also applies to things you buy from US or int - in that case we pay no tax, but need to charge both) I can understand how frustrating this may be for you. But it is the document of origin that determines the tax code when you pull a billable expense into an invoice. It is populating the invoice with the exact line that was in the bill/expense document. The item code will not override the line at this point. You have to update the tax code manually, if you wish to charge both taxes.
Example 2 - I buy an item for 100+pst/gst ($112) - mark it billable to a customer. When I bill to a customer QB charges the 107 (item + pst) and marks it as GST and PST. The customer is now Paying PST twice on the item. The same is true here . . . the invoice is pulling from the document of origin and if you paid both taxes to the vendor, it will pull that exact line into the invoice.
At this point, the treatment of the PST amount depends entirely upon whether your vendor rightly or wrongly charged you PST on the purchase transaction. Despite your PST tax license, if you paid PST on something you shouldn't have because you purchased it specifically for re-sale, then you are correct . . . the cost should be $100.00 and you will have to override the $107 to $100.
But QBO doesn't know if you should or shouldn't have paid PST on that item. It only knows that you entered both taxes at the time of recording the vendor purchase, because that is how the vendor charged you and you must make an entry that matches the purchase document. In this case, then you would pay the PST (which still becomes part of your cost) and you would recover it (crediting that cost) by including $7.00 on your monthly self-assessment report/entry where you recover PST you shouldn't have paid, and remit PST you should have paid but were not charged for by the vendor. Unfortunately, this is a manual exercise and must be done with a JE.
CR COGS or expense you should not have paid tax on 7.00
DR PST Payable 7.00
This usually only can be accomplished by doing a manual audit of all your vendor invoices each month prior to filing your sales tax return. Even though you do have a PST tax license number, it is surprising how many of your vendors may not charge you tax on certain goods and services, when they really should have. Again, because of your tax license, they are assuming that everything you buy from them is tax exempt, when that is not always true. For this reason, you must audit your vendor invoices to catch tax that you should have paid and didn't. These lines can be put in the same JE as above. I keep a running JE all month long to record these transactions and then create a custom report for back-up, prior to sales tax filing to identify the adjustments I’m making to PST. All of these manual transactions will flow through to your sales tax report, but only if you identify the correct tax line for PST Payable in the JE – meaning the Sales Tax field cannot be left blank when posting directly to PST Payable.
DR COGS or Expense you should have paid tax on 7.00
CR PST Payable (self-assessed) 7.00
On the other side of the coin, if you were charged PST correctly, meaning that the good or service is not for an inventory item or COGS but rather an expense, and you are simply going to "recover" the cost of your expense from a client, then the $107 is correct. PST is not a refundable tax like the GST and the PST you pay on goods & services becomes part of your cost. If you look at your P & L reports, anything you have paid PST on is included in the P & L in the COGS and Expense sections. This is why QBO brings it in at a cost of $107 - - this is accurate, in this situation. If you, in fact, only charge the customer $100.00, you are losing $7.00.
You purchase goods from your vendor and you pay both taxes:
DR CR
DR COGS or Expense 100.00 )
DR PST 7.00 ) This posts to the same expense as the first line
DR GST 5.00 ITC
CR Bank 112.00
If you do the transaction this way (for this situation), as you are proposing:
CR Expense Reimbursement 100.00
CR PST 7.00 Must be remitted to gov't
CR GST 5.00 Must be remitted to gov't
DR Accounts Rec or Cash 112.00
On this transaction you must remit the PST . . . it is not part of your sale (unlike on the purchase transaction where the PST became part of your cost). Note that you have just lost $7.00
In order to at least recover your cost, you would have to sell or be reimbursed as follows:
CR Sales (or Exp Reimbursement) 107.00
CR PST 7.49
CR GST 5.35
DR Accounts Rec or Cash 119.84
Now your total cost of your purchase and your reimbursement breaks even.
If it is a straight reimbursement, you could maybe make the case to not even charge PST on the reimbursement item, as you have rightly stated that PST has already been paid on that item, and GST is an in and out so it is a wash. In my province, it used to be that PST only had to be paid once on an item. That has since changed and there are plenty of areas where the provincial government is now double dipping on PST and we must charge PST on everything, whether the PST has been paid already by someone else. However, I’m not sure how BC handles this.
What we should do is have a new PST code on purchases - "GST+PST-Refundable". The PST paid would go in to a separate account. Then we actually charge the customer $100 + PST and we claim the $7 on the back end back from the gov (would need a report). As mentioned previously, this would only work if all PST you pay on purchases are items for re-sale and you are entitled to reduce your PST return by these amounts. QB Desktop has the option to track PST in a separate account or add it into the cost of the transaction, but it is default behaviour in QBO for PST to be tracked in the same account as the expense account on the transaction. I prefer it this way and use my self-assessment JE's to adjust it to accuracy if necessary, but I understand why some people would want it tracked in a separate account. Oddly enough, this is how QBO used to behave but so many complained that they wanted it tracking in the same account as the rest of the expense, they changed it. To let the QBO developers know what you want, please use the Gear Icon-->Feedback to explicitly outline that you would like to see the option for the ability to track PST in a separate account. They have both options in QB Desktop - I don't know why they wouldn't be able to do the same in QBO.
TAX rules should be:
An item's classification determines what taxes apply to it (and the rates).
A customers tax status decides what taxes do not apply (at the invoice level).
[Taxes applied at purchase have NO effect on items' tax status - only items' cost] For reasons already mentioned, it would be difficult to apply these tax rules to lines which have originated in another type of document and are being copied into your current transaction. Maybe the developers can figure out a way to make this happen, but I understand why it is currently behaving the way it is.
Hope this helps somewhat. Best of luck :)
