HST: A Flow Through?

As a client earns TRADEdollars they have to charge HST (in T$) and remit to the CRA in CDN$, however, as they spend TRADEdollars they pay the HST in TRADEdollars and file for an input tax credit in CDN$’s from the CRA.


For example if a client (printer) sold $5000 worth of printing and purchased $5000 worth of advertising, the transactions would be processed as follows:

1)      Sell Printing

Dr. TRADEBANK “BANK” ACCOUNT                          $5650

Cr.          Sales                                                                                           $5000   

Cr.          HST charged on Sales                                                              $650


[Note: At this point if nothing further happened during the HST remittance period (which could be monthly, quarterly or annually depending on the business) the printer would owe $650 in CDN$’s to the government when they filed their HST return.]



2)      Purchase Advertising

Dr. Advertising Expense                                                $5000

Dr. HST paid on Expenses                                             $650

Cr.             TRADEBANK “BANK” ACCOUNT                                              $5650


[Note: as the expenses occur, the company has an ITC to apply against their HST remittance when they file their return.  So if this happened in the same HST remittance period as the sale, then the business would have an additional $650 showing up in the HST on sales, and a deduction of $650 showing up as an ITC…making the net impact in cash HST remittance of trading = $0.  If timing  crosses over remittance period they will pay out extra one period and get back in next period.  Since it is rare that an on-going business gets a net HST refund, since it means HST’able expenses are greater than HST’able revenue, they won’t get an actual cheque but just a reduction of amount they owe in that subsequent period.]

On transactions $5,000 or more (inclusive of taxes), the seller has the ability to request a cash portion on the transactions anywhere from 1-99% of the transaction…but the buyer has the choice whether to move forward with the purchase.  The greater the % of trade the seller is willing to accept the greater likelihood of the buyer moving forward.    The % should be agreed upon going into the transaction. 





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