Tax exempt vs out of scope tax

JonSWR · ‎August 09, 2020

I'm trying to confirm the difference here, because i'm not exactly sure what the difference is, other than the fact that tax exempt shows up in the taxable summary report (0%) whereas out of scope is omitted.

Does it matter which one you use, they are both 0%. The Income Tax Act has a discussion about zero rated vs exempt, but I dont get the purpose of out of scope.

I used exempt for GST on imports, but this kept showing up in the taxable sales summary, so I changed to out of scope. Neither changes the ITC, but I wanted to do this correctly.

Also, for hotels and purchases during a business trip to the US, I marked all of these as exempt, because it was for business and I figured it should show up in the report.

Is there any reason to use out of scope?

Nick K · ‎August 10, 2020

Hi JonSWR,

Understanding which sales tax items to use and what each are for is a great way to make sure your books are correct and you have an accurate sales tax filing. I can help point you in the right direction.

When you select a sales tax code you first need to make sure if what you are buying or selling is taxable and then which sales tax code to use. Here is a list of common sales tax codes and what they are used for. Another place I'd suggest looking is the CRA website as they have a wealth of information to help with your business needs. You can use this link to find out more about sales tax and international taxes for your business. If you still have questions regarding sales tax codes I'd suggest contacting an accountant or the CRA to find out more about when to use different sales tax codes. If you don't have an accountant, we can help with that! You can visit our find an accountant page to find one in your area to help. If you rather get in touch with the CRA you can get their contact info from this link.

Have a great day!

View solution in original post

JonSWR · ‎August 09, 2020

Quick correction, I meant I was using out of scope for income tax payments, workers comp..GST on imports is GST for ITC

Nick K · ‎August 10, 2020

Hi JonSWR,

Understanding which sales tax items to use and what each are for is a great way to make sure your books are correct and you have an accurate sales tax filing. I can help point you in the right direction.

When you select a sales tax code you first need to make sure if what you are buying or selling is taxable and then which sales tax code to use. Here is a list of common sales tax codes and what they are used for. Another place I'd suggest looking is the CRA website as they have a wealth of information to help with your business needs. You can use this link to find out more about sales tax and international taxes for your business. If you still have questions regarding sales tax codes I'd suggest contacting an accountant or the CRA to find out more about when to use different sales tax codes. If you don't have an accountant, we can help with that! You can visit our find an accountant page to find one in your area to help. If you rather get in touch with the CRA you can get their contact info from this link.

Have a great day!

gsb06 · ‎January 22, 2021

Hi Jon I noticed do you do imports as well do you know if the client can claim ITC on imports? my client spend so much money on bills from china so I was wondering how can we claim some ITC for it? thanks

JamesM4 · ‎January 22, 2021

Hello gsb06. Knowing when to claim ITC on imports helps you save time as you record your transactions. I'd like to make sure you get the support you need and I highly recommend reaching out to an accounting professional to learn more about claiming the ITC on your client's imports. You can search for a accounting professional on our site using this link here. I'll also leave this question open so other accounting community members can share their advice.

JonSWR · ‎January 22, 2021

We only claim ITC if we paid HST or GST to a Canadian broker or other company that provided us with service and the tax is clearly identified in the invoice. I think it's best to get advice from a professional if you're not sure.

gsb06 · ‎January 22, 2021

oh ok, exactly I have a broker invoice and it says multiple value taxes of higher amounts like 10k or 3k and at the bottom says GST 700 like, what?!. I feel I am missing something and my accountant is useless. lol

Dawner · ‎August 20, 2021

Yes, you claim the ITC from the broker invoice as the GST includes both the GST on the broker fee plus the GST on what was stated as the value of the item. You do not claim GST on the original invoice of the item purchased. Hope that helps clarify.

Topics

Training

Community

Resources

Tax exempt vs out of scope tax