Recording tax paid on purchases?

Question

When bookkeeping do you keep sales tax (HST paid on purchases) separated  even when purchasing items to be expensed, like office supplies?

Also, do you keep the sales tax separated when purchasing raw materials to be used to make items requested for a specific job? Like lumber or sheet metal?

I can only find information for keeping tax separated when purchasing inventory you plan to resell, like t-shirts or something.

Please note, I am in Canada.

Thanks!

coraann · Answer

If you are a business owner, you should have a tax number, which allows you to purchase all business
related items, tax free. You would make reports periodically throughout the year, stating your purchases
and the tax amounts not paid. You must keep records of all.

bw022 · Answer

Yes. You need to track it separately.

Companies pay HST (GST + PST) when they purchase goods or services. They then charge HST when they sell an item or service. Come tax time (typically quarterly for most businesses) they then submit the different between what they charged and paid to the government. Knowing the amounts of both is necessary. Any accounting software will track this -- requiring you to enter the base amount and then selecting which taxes apply.

You don t have to specifically track HST by job -- although most accounting systems would allow you to report on it that way if needed. For quarterly remittances, the government only cares about the difference between what you collected and what you paid out.

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Recording tax paid on purchases?

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