Entrepreneurship & Small Business

GST/HST deducted from corporate taxable income or not?

  • Last Updated:
  • Apr 13th, 2017 4:52 pm
[OP]
Newbie
Apr 11, 2017
3 posts

GST/HST deducted from corporate taxable income or not?

I just incorporated last year, and the first year's income tax is due.

One basic question that I do not get clear answer. Should the GST/HST for my sales be deducted from net income, or taxable income?
I can not find this answer in the forms or the Revenu Quebec guide, maybe because of my poor French.

The situation is, if I calculate income (before tax) - HST/QST - payrolls(wages+tax), I have a negative number. However my accountant's summary still requires me to pay income tax.

I though the taxable income shall not include sales tax which I need to return to CRA and REvenu Quebec...
3 replies
Newbie
Jan 18, 2017
47 posts
27 upvotes
GST/HST is calculated on your gross income. So normally:

Gross sales * 5% = How much GST you owe. (Assuming Alberta GST rates. If you're in a different province, substitute the appropriate rate)

If you haven't been tracking HST separately, and just lumped all of your sales deposits as a single item, you'll want to split out the GST due:

Gross sales (including GST) * (5/105) = How much GST you owe.

You are correct that "Taxable income" doesn't include sales + GST. It's based strictly on sales less expenses.
______
Canadian & US tax guy
Sr. Member
Feb 25, 2007
905 posts
363 upvotes
Ottawa
My understanding is that HST/GST/QST/PST collected is never your income at all, it is merely tax you collected on behalf of the government, and are obligated to remit (less input credits etc).
Payroll "taxes" *are* expenses off your income.

So suppose you had:
$1000 revenue
$130 HST collected in addition
-$250 payroll you paid
-$50 payroll "taxes" (=various deductions, not taxes strictly speaking)
-$600 other expenses, goods and services you paid for to generate the revenue
-$78 HST you paid on those $600 expenses

Then, your gross revenue would be $1000, your expenses would be $1000-250-50-600=$900 so your net income before tax would be $100
Meanwhile, you collected $130 HST for the government, and you have HST input credits of $78, so you owe the govt $52 HST

Meanwhile your cash flow would have had $1130 in and $978 out, for an apparent net income of $152. But $52 of that is not yours, but the government's.

All sorts of simplifications made, including just (Ontario) HST rather than Quebec GST and QST.
Deal Addict
Aug 19, 2013
2394 posts
974 upvotes
Hst does not affect your income at all. You charge it when you make a sale, receive the hst from your customer then it is sent in to the government.

You should consider hiring and accountant or bookeeper to help you out.

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