When working on an event budget, have you ever thought, “How do I account for the taxes we pay on my event budget without adding GST?”? Guess what, you don’t! Many times, Board members will ask why we have not included the sales tax on their event budget. It seems reasonable that they would have to include these amounts paid since it is cash coming out of their proverbial pockets. The quick and easy explanation is that the sales tax is not really the association’s expense.
Any association registered for GST/HST must file a sales tax return periodically. This is done either monthly, quarterly or annually. The return reports the sales tax collected on goods and services provided during the period. This is money the association has received from customers which must be submitted to Canada Revenue Agency. The return also includes a line for Input Tax Credits (ITCs) which reduces the money the association has to remit to CRA. ITCs are the sales taxes the association pays to vendors for goods and services purchased. When these two lines, sales taxes collected and paid, are offset the result is that the association will either receive a refund or must remit funds to the CRA. Think of the association as a pass through vehicle—sales taxes paid and collected do not stay with the association; they pass through the association on to the government.
As always, there are exceptions. There are two instances where sales tax should be included on your event budget.
1) If your association is not registered for GST/HST. Associations with less than $30,000 in taxable sales have the choice to register for GST/HST. After passing this threshold, registration is mandatory. An association that is a registered charity can meet a higher threshold of $50,000 in taxable sales or $250,000 in gross annual revenue before mandatory registration. If your association chooses not to register, then no sales taxes are collected and remitted to the CRA. On the other hand, any sales tax paid cannot be claimed as an ITC and it becomes the association’s expense and should be budgeted for accordingly. The CRA does provide relief to the tax burden for charities though through the Public Service Bodies Rebate. In Ontario, sales tax paid on purchases receive a rebate of 50% on federal portion of HST and 82% on provincial portion of HST. The charity would absorb the portion of sales tax that is not rebated and should be factored into your event budget.
2) The event is held in a province that charges PST instead of HST. Several provinces maintain a separate provincial sales tax in place of HST. In Quebec, you can register for a QST account which would allow your association to claim ITCs on any QST paid. The other provinces with separate PST are BC, Saskatchewan and Manitoba. These provinces also do not have ITCs for business accounts. If the event is taking place in one of these provinces, your budget should include the PST that will be paid on purchases.
Keep these exceptions in mind when developing your next event budget. Just be sure to understand the reasoning in case your client asks for clarification.
Post authored by Michelle Prior.
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