What do all the "0% Purchases" options in the GST/HST drop down menu mean?

Ivan4 · ‎March 11, 2019

This is a 2 part question. QB is telling me I need to assign a HST/GST type to a monthly bank account fee I am trying to add as an expense but I don't know which option to select (I assume it's 0% tax). I have the following options but don't know which one applies or what all the 0% purchase options mean. Can anyone tell me what to select but also expand on what each option is used for?

Exempt (0% Purchases)
Zero Rated (0% Purchases)
Out of Scope (0% Purchases)
HST ON (13% Purchases)

Anonymous · ‎March 11, 2019

This is just about getting to know the GST rules - which must have changed since i have no idea what "Out of Scope" is. But for the others:

"Exempt" is a class of services which are always exempt from GST - these services are defined in the GST regulations. examples: Interest, life insurance premiums, federal & provincial taxes.

"Zero Rated" is for goods/services that are normally taxable - but in special situations the tax is not charged - ie: exported goods

"HST ON" is just your 'normal' taxable goods in Ontario where they have a combined sales tax called HST (instead of a PST+GST system). HST operates exactly like GST except for the rate.

View solution in original post

Anonymous · ‎March 11, 2019

This is just about getting to know the GST rules - which must have changed since i have no idea what "Out of Scope" is. But for the others:

"Exempt" is a class of services which are always exempt from GST - these services are defined in the GST regulations. examples: Interest, life insurance premiums, federal & provincial taxes.

"Zero Rated" is for goods/services that are normally taxable - but in special situations the tax is not charged - ie: exported goods

"HST ON" is just your 'normal' taxable goods in Ontario where they have a combined sales tax called HST (instead of a PST+GST system). HST operates exactly like GST except for the rate.

Jacsla · ‎March 12, 2019

What about purchases for software or memberships online(US BASED) that do not charge tax ? Would that be out of scope ? If I'm getting paid for items sold in the US , where I am not collecting GST , what rate would I use for the deposits ?

Norman_C · ‎March 20, 2019

What about purchases of food supplies (for resale as taxable meals)? Are they zero rated or exempt?

Anonymous · ‎March 20, 2019

All purchases and sales outside of Canada can be classed as 'Z' for gst

Anonymous · ‎March 20, 2019

If you're buying goods in Canada and are not being charged GST then it must be "Exempt"

Meaghan4 · ‎August 20, 2020

Which one did you select? I have the same quesiton.

Norman_C · ‎August 21, 2020

Hi Meaghan and others:

To pick up from an earlier post:

* E "Exempt" is a class of services which are always exempt from GST - these services are defined in the GST regulations. examples: Interest, life insurance premiums, federal & provincial taxes.

* Z "Zero Rated" is for goods/services that are normally taxable - but in special situations the tax is not charged - ie: exported goods

* HST "HST ON" is just your 'normal' taxable goods in Ontario where they have a combined sales tax called HST (instead of a PST+GST system). HST operates exactly like GST except for the rate.

* Out of Scope

I think the trick is to be consistent .

WRT the questions on :

Unprocessed or bulk food purchases for resale - I would go with "E"
Sales (incl subscriptions) from Canada to non-Canadian-based customers for use outside Canada - I would go with "Z"
"Out of scope" - I would reserve for non-taxable items such as depreciation, should QBO ask for a tax code

My 2 c's worth

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What do all the "0% Purchases" options in the GST/HST drop down menu mean?