Taxes: Harmonized Sales Tax (HST) Reporting Options
By Sarah Curry
It is important that staff of nonprofits understand their HST filing requirements. It is also important, and potentially advantageous, to be aware of the different HST reporting options that are available.
An organization may elect to use one of the alternate, often simpler, methods of accounting for and reporting HST if they meet certain criteria. Depending on the organization and the composition of its expenses, time and money could be saved by selecting one reporting method over another.
An organization is required to register for HST if its revenue from taxable supplies exceeds $50,000 in a calendar quarter. HST registrants are required to charge and collect HST on taxable supplies. The applicable HST rate varies by province—in Ontario, for example, it is 13 percent. An HST-registered organization is eligible to claim input tax credits (ITCs) for HST paid on expenses related to its commercial activities.
Most HST-registered organizations use the "regular" method of reporting HST. Under this method, the organization must record the amount of HST collected/collectable or paid/payable for each commercial transaction. The net amount is paid to, or claimed as a refund from, the Canada Revenue Agency (CRA) on a HST return.
The Special Quick Method
Qualifying organizations, those for which government funding makes up at least 40 percent of total revenue, can elect to use the special quick method of accounting for HST. Under this method, the tax balance due to the CRA is calculated as revenue from taxable supplies multiplied by the applicable special quick method rate. The applicable rate(s) will depend on where the organization has a permanent establishment and where the taxable goods or services are sold or provided.
For an organization that holds a permanent establishment and provides services in Ontario, the special quick method rate is 9.9 percent. There is no need to record the actual amount of HST paid on each commercial transaction, which may simplify the reporting process and reduce the administrative burden to the organization. ITCs can still be claimed on certain purchases, such as real property, capital assets and related improvements.
The Quick Method
Even if an organization does not qualify to use the special quick method, they may elect to use the quick method if their annual revenue from taxable supplies is less than $400,000. The quick method is very similar to the special quick method, except the organization is entitled to a 1 percent credit on the first $30,000 of sales, and the rates are different. The quick method rate for organizations that provide services in Ontario is 8.8 percent.
It should be noted that a separate quick method is applicable for registered charities, even though a registered charity is also a nonprofit and might receive 40 percent or more of its funding from a government branch.
It’s always recommended you speak with your advisor any time you’re dealing with a tax reporting issue.
Sarah Curry, CPA, CA is a senior staff accountant, assurance & advisory services at Ginsberg Gluzman Fage & Levitz, Chartered Accountants, in Ottawa. Contact her at firstname.lastname@example.org, visit the firm at www.GGFL.ca and follow on Twitter @GGFLCA for the latest accounting news and information.
Related AFP ResourcesAFP Offers Tax Incentive Recommendations to Finance Committee
President Obama and GOP Tax Cuts Extension Could Extend the IRA Rollover Provision
AFP Political Action Committee Fact Sheet and Q&A
IRS Issues Revised Instructions on New Form 990
IRA Rollover Provision Introduced by Key Senators