I have a question that is unusual, though in this current situation there may be others in this situation. I have a client who owns a horse stable (boarding and lessons) is incorporated and was forced to close public operations when the Ontario gov't closed non-essential services. They have had clients donate money to them to help with the care of the horses. Can anyone offer insight how this should be recorded? I'm thinking it would be "other income" similar to rebate income. I don't want to invoice it and cause HST to be owed on it. Has anyone had this situation before?
I believe that even if you call it other income, you would have to back out the HST and record it. i.e. receive a donation for $10,000, you record other income of $8,849.56 and HST of $1,150.44 (assuming a 13% HST rate).
If your client is not a non-profit charitable corporation, then it is just income, like any other income, albeit they have not exchanged a good or a service for that income. They would also have to make it clear to their donors that they are not eligible to give a charitable receipt so the donor will not be able to claim it as a charitable donation.
Try as I might, I can't confirm this anywhere. All I can confirm is that charitable donations are only considered so when giving to a legit non-profit, charitable corporation that can legally issue a charitable receipt. So I am drawing the conclusion that in this situation, the donation received by your client is just income and as such, tax must be remitted.
Just to be sure, I would contact your external accountant and verify.
Obviously, a receipt from the company would have to be issued to the donor as cash received, just for good bookkeeping. But it should be stipulated that this is a non-charitable donation.