My GST at 2.5% for meals is not recording over as an ITC

Hi MCommon,

Welcome to Community.  It's important that the tax on meals is being recorded accurately to meet government regulations.  With QuickBooks Online, you can set up and manage your sales tax to accomplish your goals and get back to business.  I'd be happy to provide some insight here!

As indicated, you've set up the 2.5% GST, however, it's not recording to the ITC.  This sounds like we need to review the tax center as it should have three portions including eligible, ineligible and group sales tax.  I'll guide you through the steps so you can review what may have been overlooked.

Let's start with the eligible portion.

1. From the left menu select Taxes and Manage Sales Tax

2. Locate the agency and hit Add Rate

3. Type the Tax Name as 'GST 2.5% Liability’

4. Select I pay this on purchases 

5. Enter the Tax on Purchases rate as 2.5%

6. Choose Liability from the Account drop-down

7. From the drop-down beside Show tax amount on return line select Input Tax Credits (ITCs) 

8. Hit Add

Next to the newly created tax rate, select Make inactive to prevent it from showing up in your Sales and Expense forms but still allow you to add them to a group rate.

Now we'll create the rate for the ineligible portion.  Here's how:

1. Select Sales Tax from the left menu, hit Manage Sales Tax and Add rate

2. Enter the Tax name as 'GST 2.5% Expense’

3. Checkmark the I pay this on purchases box

4. Enter the Tax on purchases rate as 2.5%

5. Select Non-tracking from the Account drop-down

6. Hit Add

7. Make inactive. 

Your last step is to create the group tax rate by following these steps:

1. Click Add tax

2. Locate the Group rate section and select Add

3. Choose a Group Name 

4. Select GST 2.5% liability from the first Tax rate drop-down the net amount will be the default selection in the Applicable on drop-down

5. Apply GST 2.5% Expense from the second Tax rate drop-down. Select Net Amount from the Applicable on drop-down arrow

6. Then Add another tax rate

7. Use your PST rate for Purchases from the third Tax rate drop-down. Select Net amount from the Applicable on drop-down

8.You should have 3 sales tax rates in total

9. When finished, hit Add.

When you enter your meals, the 2.5% should now appear.  Here's an article to guide you through setting up sales tax rates for Meals and Entertainment, for your reference.

If you continue to experience difficulty with this, I'd recommend reaching out to your accountant for additional expertise.  If you don't have one, we can help you locate one here.

Please reach back out should you have any other questions.  We'd be glad to assist ! 

I setup the 2.5% GST on Meals tax code, per QBO instructions ~ to the T ~ and it has stopped working in all Clients with this code. Why isn't it working anymore? 

Hi SheilaD1,

Thanks for joining in on this thread.  It's important that you're able to successfully apply the GST tax code for meals.  In QuickBooks Online, this type of behavior may be in relation to a few different things.  I'll help you take a closer look at possible reasons behind this.

I'd recommend going through some basic troubleshooting steps, if you haven't already.  First, you'll need to logout of your account and clear cache on your preferred browser.  Open a new browser in private or incognito mode and login to your account.  If it remains the same, I suggest trying different browsers, such as Google Chrome, Firefox, Edge or Safari. 

You also may want to check to see if the tax code has been made inactive.  Here's how:

1. From the left menu, select Taxes

2. Click on the tab to Manage Sales Tax

3. Locate the item in your list and hit Make Active, if the option is available.

One more thing that may cause this, if you've set up the tax code specific to Ontario but the customer may be in a different province.  You'll need to check your customer information to determine this by following these steps:

1. Click on Sales from the left menu and then Customers

2. Select the Customer and then Edit

3. From the side bar hit Addresses

4. Update any information necessary and click Save.

For your reference, here's an article to assist with setting up sales tax for meals and entertainment for different provinces in QuickBooks Online.

If you require additional assistance, please contact our Support Team.  They'd be glad to go through this with you to pin point the cause and take a deeper look at the situation from our end.

Schedule a Callback or start a Chat: click ? in the upper right > enter "Contact support" > click Contact Us > provide a brief summary of the issue > hit Let's Talk > choose Get a callback or Start a Chat.
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Please don't hesitate to let us know if there's anything else we can assist you with.  Enjoy the rest of your day!