Sales Taxes (Alberta Council)

From SJA

This is a draft document.

Contents 1 The Need 2 Policy 2.1 Purpose 2.2 Scope 2.3 Responsibilities 2.4 Definitions 2.5 References and Related Statements of Policy and Procedure 3 Procedures 3.1 Accounting for Sales Taxes 3.2 Tax Exemption Certificates 3.3 Remitting Sales Taxes 3.4 Disclosure to Customers 4 Attachments

The Need

Organizations are required to collect various taxes on sales in Canada. When doing so, they are actually acting as agents for the federal or provincial government. Those tax collections are not part of sales revenue, but must be accounted for and remitted to the applicable government.

Policy

The company will collect sales tax as required by law. This consists of GST.

Purpose

This Statement of Policy and Procedure describes the policy to be followed in charging, accounting for, and remitting sales taxes.

Scope

This policy applies to all employees involved in transactions and records relating to sales taxes.

Responsibilities

The Administrative Department is responsible for ensuring that:

• GST is recorded correctly for each sale as set up on the product numbers in Unity.

The Finance Department is responsible for ensuring that:

• Tax codes in Unity are set up accordingly for products that are to be charged GST and products that are exempt from GST.
• The required sales tax forms and the appropriate amounts are remitted and recovered.

Definitions

• "GST" means Goods and Services Tax charged by the federal government, administered by the Canada Revenue Agency. The GST rate is 5%.

References and Related Statements of Policy and Procedure

• Revenue Recognition (Alberta Council)
• Sales Taxes Paid or Payable

Procedures

Accounting for Sales Taxes

• When sales are recorded, taxes that are collectible from the purchaser must be billed and recorded on the invoice. Those taxes are posted to a liability account pending their remittance to the appropriate government.
• If the purchaser is exempt from GST, the reason and exemption number must be recorded in the comments field on the Unity sales invoice.
• When a bad debt is written off, sales taxes previously recorded must be recovered by reversing the tax entries previously made.

Tax Exemption Certificates

• Tax exemption certificates must be retained fro customers claiming an exemption. Where a customer is exempt under circumstances that do not require a certificate, then the reason for the exemption should be noted and retained in the customer file.

Remitting Sales Taxes

• All sales taxes must be remitted to the applicable federal or provincial government or government when due.
• Sales taxes will be remitted by the Finance Department.

Disclosure to Customers

• GST must be shown separately on all invoices on which they are levied.
• The GST registration number ("Busines Number") supplied by the Canada Revenue Agency must be shown on all invoices on which GST is charged.

Attachments

None