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Set up a sales tax rate for Meals and Entertainment in QuickBooks Online

by Intuit•20• Updated 2 months ago

To begin setting up a sales tax rate, follow these steps:

Go to Taxes and select Sales tax (Take me there).
Ensure Sales Tax is shown at the top. (Tip: If you use payroll in QuickBooks Online, you may need to select Sales Tax as opposed to Payroll Tax.)
Select Manage sales tax.

After Step 3, you'll follow the steps below for your desired province:

Alberta
British Columbia
Manitoba
New Brunswick
Newfoundland & Labrador
Northwest Territories
Nova Scotia
Nunavut
Ontario
Prince Edward Island
Quebec
Saskatchewan
Yukon

Alberta

Create a sales tax rate for the eligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'GST 2.5% Liability’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Liability from the Account drop-down.
Select Input tax credits (ITCs) from the Show tax amount on return line drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create a sales tax rate for the ineligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'GST 2.5% Expense’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Non-tracking from the Account drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create the group sales tax rate

Select Add tax.
Locate the Group rate section and select Add.
Enter the Group name as Meals and Entertainment, M & E, or Meals.
Select GST 2.5% liability from the first Tax rate drop-down. Net amount will be the default selection in the Applicable on drop-down.
Select GST 2.5% Expense from the second Tax rate drop-down. Select Net amount from the Applicable on drop-down.
You should have 2 sales tax rates in total.
Select Add.

British Columbia

Create a sales tax rate for the eligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'GST 2.5% Liability’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Liability from the Account drop-down.
Select Input tax credits (ITCs) from the Show tax amount on return line drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create a sales tax rate for the ineligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'GST 2.5% Expense’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Non-tracking from the Account drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create the group sales tax rate

Select Add tax.
Locate the Group rate section and select Add.
Enter the Group name as Meals and Entertainment, M & E, or Meals.
Select GST 2.5% liability from the first Tax rate drop-down. Net amount will be the default selection in the Applicable on drop-down.
Select GST 2.5% Expense from the second Tax rate drop-down. Select Net amount from the Applicable on drop-down.
Select Add another tax rate
Select your PST rate for Purchases from the third Tax rate drop-down. Select Net amount from the Applicable on drop-down.
You should have 3 sales tax rates in total.
Select Add.

Manitoba

Create a sales tax rate for the eligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'GST 2.5% Liability’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Liability from the Account drop-down.
Select Input tax credits (ITCs) from the Show tax amount on return line drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create a sales tax rate for the ineligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'GST 2.5% Expense’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Non-tracking from the Account drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create the group sales tax rate

Select Add tax.
Locate the Group rate section and select Add.
Enter the Group name as Meals and Entertainment, M & E, or Meals.
Select GST 2.5% liability from the first Tax rate drop-down. Net amount will be the default selection in the Applicable on drop-down.
Select GST 2.5% Expense from the second Tax rate drop-down. Select Net amount from the Applicable on drop-down.
Select Add another tax rate
Select your PST rate for Purchases from the third Tax rate drop-down. Select Net amount from the Applicable on drop-down.
You should have 3 sales tax rates in total.
Select Add.

New Brunswick

Create a sales tax rate for the eligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'HST 7.5% Liability.'
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 7.5%.
Select Liability from the Account drop-down.
Select Input tax credits (ITCs) from the Show tax amount on return line drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create a sales tax rate for ineligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'HST 7.5% Expense'.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 7.5%
Select Non-tracking from the Account drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create the group sales tax rate

Select Add tax.
Locate the Group rate section and select Add.
Enter the Group name: M&E (NB)
Select HST 7.5% Expense from the first Tax rate drop-down. Net amount will be the default selection in the Applicable on drop-down.
Select HST 7.5% Liability from the second Tax rate drop-down. Select Net amount from the Applicable on drop-down.
You should have two tax rates in total.
Select Add.

Newfoundland & Labrador

Create a sales tax rate for the eligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'HST 7.5% Liability.'
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 7.5%.
Select Liability from the Account drop-down.
Select Input tax credits (ITCs) from the Show tax amount on return line drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create a sales tax rate for ineligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'HST 7.5% Expense'.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 7.5%
Select Non-tracking from the Account drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create the group sales tax rate

Select Add tax.
Locate the Group rate section and select Add.
Enter the Group name: M&E (NF)
Select HST 7.5% Expense from the first Tax rate drop-down. Net amount will be the default selection in the Applicable on drop-down.
Select HST 7.5% Liability from the second Tax rate drop-down. Select Net amount from the Applicable on drop-down.
You should have two tax rates in total.
Select Add.

Northwest Territories

Create a sales tax rate for the eligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'GST 2.5% Liability’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Liability from the Account drop-down.
Select Input tax credits (ITCs) from the Show tax amount on return line drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create a sales tax rate for the ineligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'GST 2.5% Expense’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Non-tracking from the Account drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create the group sales tax rate

Select Add tax.
Locate the Group rate section and select Add.
Enter the Group name as Meals and Entertainment, M & E, or Meals.
Select GST 2.5% liability from the first Tax rate drop-down. Net amount will be the default selection in the Applicable on drop-down.
Select GST 2.5% Expense from the second Tax rate drop-down. Select Net amount from the Applicable on drop-down.
Select Add another tax rate
Select your PST rate for Purchases from the third Tax rate drop-down. Select Net amount from the Applicable on drop-down.
You should have 3 sales tax rates in total.
Select Add.

Nova Scotia

Create a sales tax rate for the eligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'HST 7.5% Liability.'
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 7.5%.
Select Liability from the Account drop-down.
Select Input tax credits (ITCs) from the Show tax amount on return line drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create a sales tax rate for ineligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'HST 7.5% Expense'.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 7.5%
Select Non-tracking from the Account drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create the group sales tax rate

Select Add tax.
Locate the Group rate section and select Add.
Enter the Group name: M&E (NS)
Select HST 7.5% Expense from the first Tax rate drop-down. Net amount will be the default selection in the Applicable on drop-down.
Select HST 7.5% Liability from the second Tax rate drop-down. Select Net amount from the Applicable on drop-down.
You should have two tax rates in total.
Select Add.

Nunavut

Create a sales tax rate for the eligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'GST 2.5% Liability’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Liability from the Account drop-down.
Select Input tax credits (ITCs) from the Show tax amount on return line drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create a sales tax rate for the ineligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'GST 2.5% Expense’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Non-tracking from the Account drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create the group sales tax rate

Select Add tax.
Locate the Group rate section and select Add.
Enter the Group name as Meals and Entertainment, M & E, or Meals.
Select GST 2.5% liability from the first Tax rate drop-down. Net amount will be the default selection in the Applicable on drop-down.
Select GST 2.5% Expense from the second Tax rate drop-down. Select Net amount from the Applicable on drop-down.
Select Add another tax rate
Select your PST rate for Purchases from the third Tax rate drop-down. Select Net amount from the Applicable on drop-down.
You should have 3 sales tax rates in total.
Select Add.

Ontario

Create a sales tax rate for the eligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'HST 6.5% Liability’
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 6.5%.
Select Liability from the Account drop-down.
Select Input tax credits (ITCs) from the Show tax amount on return line drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create a sales tax rate for ineligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'HST 6.5% Expense'.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 6.5%
Select Non-tracking from the Account drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create the group sales tax rate

Select Add tax.
Locate the Group rate section and select Add.
Enter the Group name M&E (ON)
Select HST 6.5% Expense from the first Tax rate drop-down. Net amount will be the default selection in the Applicable on drop-down.
Select HST 6.5% Liability from the second Tax rate drop-down. Select Net amount from the Applicable on drop-down.
You should have two tax rates in total.
Select Add.

Prince Edward Island

Create a sales tax rate for the eligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'HST 7.5% Liability.'
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 7.5%.
Select Liability from the Account drop-down.
Select Input tax credits (ITCs) from the Show tax amount on return line drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create a sales tax rate for ineligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'HST 7.5% Expense'.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 7.5%
Select Non-tracking from the Account drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create the group sales tax rate

Select Add tax.
Locate the Group rate section and select Add.
Enter the Group name: M&E (PEI)
Select HST 7.5% Expense from the first Tax rate drop-down. Net amount will be the default selection in the Applicable on drop-down.
Select HST 7.5% Liability from the second Tax rate drop-down. Select Net amount from the Applicable on drop-down.
You should have two tax rates in total.
Select Add.

Quebec

If you are located in Québec, you will have only one tax agency card named Revenu Québec. Use this agency when setting up the GST portion of the new rates.

If you are located outside Québec you will have a tax agency card named Canada Revenue Agency. Use this agency when setting up the GST portion of the new rates.

Create a sales tax rate for the eligible portion

Locate the Canada Revenue Agency card (if present) or the Revenu Québec card (if the Canada Revenue Agency card isn’t present) and select Add custom rate.
Enter the Tax name as 'GST 2.5% Liability’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Liability from the Account drop-down.
Select Input tax credits (ITCs) from the Show tax amount on return line drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create a sales tax rate for the ineligible portion

Locate the or the Revenu Québec agency and select Add custom rate.
Enter the Tax name as 'GST 2.5% Expense’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Non-tracking from the Account drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create a sales tax rate for eligible QST

Locate the Revenu Québec card and select Add custom rate.
Enter the Tax name as 'QST 4.9875% Liability'. (Note: Visit provincial government websites for the most recent QST rate.)
Select the I pay this on purchases box.
Enter the Tax on purchases rate as the appropriate QST rate (4.9875).
Select Liability from the Account drop-down.
Select Input tax refunds (ITRs) from the Show tax amount on return line drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create a sales tax rate for ineligible QST

Locate the Revenu Québec card and select Add custom rate.
Enter the Tax name as 'QST 4.9875% Expense'. (Note: Visit provincial government websites for the most recent QST rate.)
Select the I pay this on purchases box.
Enter the Tax on purchases rate as the appropriate QST rate (4.9875).
Select Non-tracking from the Account drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create the group sales tax rate

Tip: Follow the steps closely as a group rate can't be edited once created.

Select Add tax.
Locate the Group rate section and select Add.
Enter the Group name as M&E (QC).
Select GST 2.5% Liability from the first Tax rate drop-down. Net amount will be the default selection in the Applicable on drop-down.
Select GST 2.5% Expense from the second Tax rate drop-down. Select Net amount from the Applicable on drop-down.
Select Add another tax rate.
Select QST 4.9875% Liability from the third Tax rate drop-down. Select Net amount from the Applicable on drop-down.
Select Add another tax rate.
Select QST 4.9875% Expense from the fourth Tax rate drop-down. Select Net amount from the Applicable on drop-down.
You should have 4 sales tax rates in total.
Select Add.

Saskatchewan

Create a sales tax rate for the eligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'GST 2.5% Liability’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Liability from the Account drop-down.
Select Input tax credits (ITCs) from the Show tax amount on return line drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create a sales tax rate for the ineligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'GST 2.5% Expense’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Non-tracking from the Account drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create the group sales tax rate

Select Add tax.
Locate the Group rate section and select Add.
Enter the Group name as Meals and Entertainment, M & E, or Meals.
Select GST 2.5% liability from the first Tax rate drop-down. Net amount will be the default selection in the Applicable on drop-down.
Select GST 2.5% Expense from the second Tax rate drop-down. Select Net amount from the Applicable on drop-down.
Select Add another tax rate
Select your PST rate for Purchases from the third Tax rate drop-down. Select Net amount from the Applicable on drop-down.
You should have 3 sales tax rates in total.
Select Add.

Yukon

Create a sales tax rate for the eligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'GST 2.5% Liability’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Liability from the Account drop-down.
Select Input tax credits (ITCs) from the Show tax amount on return line drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create a sales tax rate for the ineligible portion

Locate the Canada Revenue Agency card and select Add custom rate.
Enter the Tax name as 'GST 2.5% Expense’.
Select the I pay this on purchases box.
Enter the Tax on purchases rate as 2.5%.
Select Non-tracking from the Account drop-down.
Select Add.
Next to the newly created tax rate, select Make inactive. This will prevent this rate from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Create the group sales tax rate

Select Add tax.
Locate the Group rate section and select Add.
Enter the Group name as Meals and Entertainment, M & E, or Meals.
Select GST 2.5% liability from the first Tax rate drop-down. Net amount will be the default selection in the Applicable on drop-down.
Select GST 2.5% Expense from the second Tax rate drop-down. Select Net amount from the Applicable on drop-down.
Select Add another tax rate
Select your PST rate for Purchases from the third Tax rate drop-down. Select Net amount from the Applicable on drop-down.
You should have 3 sales tax rates in total.
Select Add.

Disclaimer

This article provides general information only. It is only current at the date of posting. It may not be current. It does not provide legal or tax advice and should not be relied upon for such advice. All tax situations are specific to their facts and may differ from the situations in this article. If you have specific tax questions you should consult a certified accountant or the CRA. Here is a link to the CRA page with the latest rates: Line 8523 - Meals and entertainment

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