Canadian QuickBooks Online Sales Tax Postings and Filing

Unfortunately, the QuickBooks Online API will not allow Loft to post sales tax the same way we are able to in Xero. In an Agent's payout we post a bill to be paid to the Agent. This bill will include posting the top line commission expense and income as well as the income associated with any fees deducted. Normally we are able to post tax on purchases on the expense lines and tax on sales to the income lines. QuickBooks Online will only allow posting either the credit or debit to a tax on purchases type. 

As a result we will be creating special tax rates in the Canadian version of QuickBooks Online that will make the manual adjustment you'll need to do very straightforward. 

Or if you'd like to have your accountant set them up please choose Add New Custom Rate: 

Then add the following 2 rates (the % should be the GST / HST rate for your province) 

And this rate: 

You can then map them in Loft under your Quickbooks setting tab as follows: 

You will only need to complete this manual process once per filing period so once a month, once a quarter or possibly even just once a year. 

We will set up two tax rates that are specific to Loft, and should not be used in any other way or for any manual entires. 

They will look like this; 

We map those tax rates to Loft so all the bills, invoices, and other transactions will be associated with those two tax rates. All bills to Agents will be mapped to the Commission flow through tax rate and all invoices will be mapped to the Loft tax on sales rate. In this example we're just looking at 5% GST. 

You can go ahead and post your deals and payouts as you normally would and when its time to file your sales taxes you follow this quick process to ensure the tax posted to the flow through account that is associated with income gets reallocated to the correct sales tax category for Revenue Canada. 

Step 1: Head to the Transaction Detail by Tax Code Report and set the date range to your reporting date range. 

From this report you will look to the section for the Commission flow through tax rate where you will see the total amount of sales tax that should be reallocated from the flow through to the Loft tax on sales rate. 

We will take this value and use a manual journal entry through a clearing account to move it out of Commission flow through and to the Loft tax on sales rate. 

Step 2: Add a new manual journal

To determine the amount you're going to enter you can take the value that you are correcting for, in this case from above it $286.16 and divide it by the tax rate for your province. In this case it is 5%. $286.16 / .05 = $5,723.20. This is the amount we will enter to assign the correct tax amount of $286.16 as shown below. You'll want to credit the clearing account with the tax on sales rate and debit the clearing account with the flow through rate. 

Set 3: Review your tax filing report

You should see that total be added to the outstanding tax on sales from other transactions. You're good to go!

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