setting up sales tax codes (HST/GST) for nonprofit entities. my client wants to be able to track the rebate portion of the HST/GST paid for various expenses.

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Hi Nshaikh, 

QuickBooks Online makes it easy to set up sales tax codes. You can set up your non-profit tax codes similarly to how you'd set up for-profit businesses. For the specifics on how you'd go about recording the taxes, I recommend reaching out to an accounting professional for more clarification. Otherwise, I'll be glad to show you how to set up a sales tax code in QuickBooks:

 How to set up a new sales tax code:

1.     From the left menu, select Taxes.
2.     Select Sales Tax. (Tip: If you use payroll in QuickBooks Online, you may need to select Sales Tax as opposed to Payroll Tax.)
3.     Select Manage sales tax.
4.     Select Add tax.
5.     Under What type of tax do you want to add? select Add next to one of the below options and follow the prompts to complete set up  

For more information on sales tax codes, I recommend checking out this helpful article. The article will give you more details on how to set up taxes in QBO. Let me know if you have questions. I'll be on standby in case you need anything. 

My mistake. No worries, I'll share some helpful resources related to taxes and Desktop below: 

• Pay sales tax
• Collect sales tax 
• Review sales tax reports
• Set up sales tax in QuickBooks Desktop  

Let me know if these articles help. Feel free to ask questions. 

I do the books for a non-profit (charity) organization. As we do not own any real property to speak of, the GST Return is fairly uncomplicated. The CRA instructed us to follow this procedure:

Remit 60% of all GST collected. - The GST Return in QB displays all GST collected for the period. Calculate 40% and use the Adjustment tab to reduce line 103 by this amount. Line 103 will now display the amount to be remitted to the CRA.

Claim ITC ONLY on real property and Capital Purchases. For the most part, we do not own the building we operate from (or any other real estate and purchase very little in the way of capital assets, so we do not track separately. First, we calculate 50% of the ITC reported on line 106 and record it on line 111 (Rebate) using the Adjustment tab. Then, reduce Line 106 (ITC) to zero (0) using the Adjustment Tab.

The balance remaining is how much GST you owe.

Complete GST 66 Rebate Form (not in QB - CRA only) and claim the amount reported on line 111 of the GST Return.

File both forms online at the same time. If you owed on the GST Return, but the amount of the Rebate is more than the amount you owed, the CRA will refund the difference. If the Rebate does not cover the amount owed, make a payment by the due date.

Some non-profits do claim ITC's on real property. You can create a new GST Tax Code - naming it something that identifies it as refundable (GR) and applying the code to the appropriate expenses. The tax will still be included on line 106 of the GST Return, but you will be able to run a report to isolate the refundable portion of the GST paid.

In this case, when you complete the GST Return, you would NOT reduce line 106 to zero. Instead, deduct the refundable portion (GR Tax Code) from the total ITC, calculate 50% of the Balance and enter on line 111 (Rebate). Then, reduce Line 106 to the amount reported in the GR Tax Code.

I use QBO for a non-profit organization that puts on a music festival (not yet a charity but they are applying). I didn't realize that not all GST paid on purchases is considered an ITC. This has presented me with a couple of issues that I don't know how to handle. If I understand correctly, the only GST I can claim back is for tangible items we purchase to resell (for example T-shirts) but not any other expenses (eg consultants, expenses related putting the festival on like artists, security, printing, advertising, washroom rentals, etc)

a) Am I understanding that correctly?

a) I have entered expenses with the GST tax code as of the date we registered for GST (which was after our festival last year). Can I change the GST coding to non-recoverable so all previous entries are correct and will show up on Profit and Loss statements etc since they are part of the expense now? Do I have to go edit the ones already entered to trigger the change?

2) I assume I also need a GST recoverable tax code as well for the few items that may be recoverable. I'm not of the easiest way to handle the expenses already entered yet be ready for some ITC's or if they get charity status.

3) Can I enter the entire invoice amount and use 'exempt' or 'out of scope' tax code and not enter GST separately at all?

Looking for any suggestions to help me understand how to fix it for historical data and how to best handle it going forward.

Hi L4, 

I'd be happy to chime in and offer some clarification for you in regards to your GST questions. I know how important it is to ensure you're recording sales tax entries correctly, and I'll point you in the right direction for help with this. 

I'll go through each of your questions in order to try and keep things as simple as possible. 

1. a) If you're not sure what types of transactions you're able to claim GST on, this is something you'll have to run by your accountant. While I can help answer your product-related questions, I'm not a trained accountant or equipped to help with your accounting questions. If you're not yet connected to an accountant, you can find one in your area here: Find a ProAdvisor.

b) For any changes to GST on your transactions, you'll have to manually go through each transaction to edit it directly. There's no group action that will alter historical transactions automatically. 

2. This question is also in the accounting arena, and would be best answered by an accountant. 

3. Zero value tax codes, such as Exempt, Out-of-scope, and Zero Rated can absolutely be added to your transactions. These three codes will report differently in your books, so I'd recommend reviewing this article to clarify how they work: Common sales tax codes. This is also something you can consult with your accountant on if you're unsure which one to select. 

I hope this helps offer some direction for you moving forward. I'd also like to note that while QuickBooks Online is designed to accommodate tons of different businesses, it's not quite designed for non-profit organizations. The bookkeeping for a charity involves a few unique aspects, which QBO isn't always able to accommodate directly.

If you have any other product-related questions, please don't hesitate to reach out to our tech support team. Our agents will be able to assist and get you back on track in no time. 

Have a great day.

Hi.  DO you know if there is a way to group the non refundable portion of the HST with the expense that it belongs in?  I was able to do this in Quickbooks Desktop version but now I am not able to do it in QBO.

Currently, I am using the PST codes - and it is grouping all of the Non Refundable HST amounts into Ministry of Finance Expense.  I would like this to be grouped with the expense account that the rest of the invoice is using (ie. office supplies)

Thanks!

Hello Ames22,

It sounds to me like you'd like to the ability to choose the account that the tax from certain expense transactions is recorded against. QuickBooks Online is equipped with a robust Sales Tax feature that does most of the work for you when it comes to tracking the sales tax paid and collected. Let me go over how this works.

After setting up the sales tax module in QuickBooks Online, there are two accounts created by default in the Chart of Accounts. One is called the GST/HST Payable and the other is the GST/HST Suspense. Because you're using PST you may have some additional similar accounts relevant to collecting PST. Each transaction that is entered using the related sales tax codes will be added to the Payable account. The Suspense account should balance out and remain at 0 based on whether you're receiving a refund or making a payment.

Creating a sales tax return triggers QuickBooks to enter a two-line Journal Entry to move what you owe or what is owed to you from the Payable account to the Suspense account. Filing your tax return moves the sales tax liability amount from the Payable to the Suspense account, and recording the payment moves money from the Suspense account to the bank account.

Since these two essential tax accounts are created by default in QBO, there isn't a way to change the account that specific items or expenses with the same tax code are recorded against. It may be that you should be using a different tax code for these specific items, and you can learn more on that by referring to our Common sales tax codes article. Your accountant might be able to suggest some alternative methods to do this as well, so if you're working with one already, invite them to work on your books to support you on this. Simply use the email field and Invite button from the My Accountant tab.

If you're not yet working with an accountant, we have a database of QuickBooks-certified accountants that would be eager and willing to help you out on this. They're familiar with how the sales tax module works in QuickBooks and are also experienced with other accounting methods. From the My Accountant tab, hit the Find a pro to help button to find an accountant in your area. 

I wish you all the best and hope you have a fantastic day!

Yes yes yes, I agree.  Just went to online version of the program and wondering the same myself!! 

Hi MidvalleyPTown,

Thanks for joining us here.  Welcome!  QuickBooks Online is a dynamic program to streamline your work and complete daily tasks with confidence.  I'd be happy to provide more information so you're on the right track with your QuickBooks goals!

To ensure you're on the right track with your non-profit entries and associated sales tax, I suggest reaching out to your accountant for the best course of action.  If you don't have an accountant, we can help you locate a ProAdvisor in your local area.  

Here's a few helpful guides for your reference;

Set up and record in-kind donations in QuickBooks Online

Track funds you receive from donors in QuickBooks Online

How to record donation or charitable contributions

Please don't hesitate to reach back out if you have any other questions.  We'd be glad to help!

Yes, agree that the current default set up is not that helpful for not-for-profits.  And no, "go talk to your accountant" is not the answer - this an issue with Quickbooks.  Here's what QB needs to fix:

1) the portion of refundable GST (ITCs) should be able to be sent to an ASSET account, not just the default GST Payable account.  Lots of NPOs do not have any GST collected on sales/donations etc. and therefore just want to track the rebate portion which is always an asset.  Having to manually transfer over the negative (Dr balance) from GST Payable every month is a waste of my time.

2) the portion of non-refundable GST should optionally be able to be attached to the expense category rather than going to an absolutely awful concept which is the default "GST Expense" account.  Yes I could manually reallocate the GST expense every month but that is an absolute mess and waste of time.

I don't really care if Quickbooks thinks we're all idiots and to save us from our own stupidity continues the current setup as the default but it should certainly allow us to opt out to better customization. 

Absolutely agree!

Those of us serving NPO's need to be able to choose the default Balance Sheet account for sales tax -- Asset or Liability.

As for a customized GROUP TAX RATE for NPO's,
a 'group rate' that will track the ITC portions for rebate,
AND allocate the remaining unclaimable portion of sales tax GST/PST/HST to the expense category for the transaction (office supplies, marketing, whatever)

... here's what I did:  (separate posts for separate pics)

1. First you have to create individual tax rates to do what you need. This will vary depending on your province. I am in Ontario so I used 4 codes. 

Begin by going to the tax module and click on white button, top right:  

Manage Sales Tax|

A new window will open,
Ignore the green button, top right... Look below the green button area, for the blue option:

+ Add custom rate  

2. Add a custom rate for each of the portions you need to track:

GST ITC 2.5%  - on purchases  (select Liability)

GST Expense 2.5%  - on purchases  (select non-tracking)

If applicable: in HST provinces, this would be the provincial portion of HST (percentages vary)

PST ITC 

PST Expense

You can name them anything you want and enter whatever values you need. My pic is just for an example.

3.  Make those custom codes INACTIVE (so they don't show up in your drop-down menu while you're doing your regular work).  This will still allow you to use them to create group codes.

4.  Add tax

Green button at top right  (see pic)

5.  a popout window will open.

Select the third option:  Combine taxes into a group rate

6. Name your group rate, and add the individual tax rates you just created.

Pic is just for example.
Drop down shown in my pic will be different for you, depending on what taxes you have set up.

"Applicable on"... select Net amount

When you're done, click Save, bottom right

7. That's it. You're done.

That group rate you just created will now show up in your options for sales tax codes. You can apply it to individual transactions.  : )

Tip:  if you view the transaction to see the debits and credits, use the Classic View in order to confirm that the expense amount is grouped with the expense purchase. The Modern View will show you the individual tax lines for each of those tax rates you created, but that's not how it will hit the General Ledger accounts.

I got this information here:
https://intuitglobal.intuit.com/iq/quickbooks/docs/HST_Charity_xONx.pdf

Similar topic:  if you need a Meals & Entertainment tax code:
https://quickbooks.intuit.com/learn-support/en-ca/help-article/sales-taxes/set-sales-tax-rate-meals-...

Hi Jennifer,

Thanks for this information. Does the YTD rebate gets posted to a GL Asset account? Do we file the sales tax return periodically to post the rebate to a receivable account? The PDF above for the setup seems to be for the desktop version as sales tax is not one of the item type in the online version. See below