How link sales tax accounts to appropriate liability accounts

I’ve set up a GST on Sales (2508), GST on Purchases (2509), and GST Payable (2510) as liability accounts. Then the same for PST, three accounts. How do I link the automatic accounts on an invoice (payable or receivable) to the correct account. So, for example, I invoice a customer for $200, plus 5% GST. How do I ensure that $10 goes into the 2508 account. Then I purchase an item for $100, so now I need $5 to go into the 2509 account. Now the 2510 account should show a balance of $5, which is payable to the GST folks at the government. How do I make that happen?

If you are going to be using GST/PST then you should be selecting under Setting - Tax Codes your country’s applicable codes. Once these have been selected then Manager creates default chart of accounts which are automatically linked to your transactions. Your manually created codes would only work if you processed every tax figure as a separate line entry.

Have you read this Guide on the setting up of tax codes.

Setting up tax codes

Thank you for a very fast response! I did read the article – Canada is not on the list of included countries, so I created accounts. I’ve just done it again, and now have the multiline tax codes in, and linked to my GST and PST on Sales Accounts. So how do I now create the same for GST and PST on purchases? I think I can’t, and have to use the default accounts with everything – purchases and sales – in one account.

Sylvia

Sylvia Lee

Kieran:Patrick Consulting

+1.306.988.0228 (Business & Cell)

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@KPC, you are stuck using custom tax codes, as there are no built-in GST or PST codes for Canada. Not knowing your exact location, I can only say it may be possible you have to create multi-component tax codes. This Guide may be useful:

Your last post came across while I was writing my earlier reply. Your situation for purchase invoices can be different than many users because Canadian sales taxes (if I remember correctly) do not offset. That is, the amount you collect from customers and must remit to the tax authority is not reduced by amounts you pay to suppliers.

So in most situations, you simply enter the tax-inclusive amount in a payment or purchase invoice and leave the tax code blank. The supplier is responsible for collecting, reporting, and paying the tax. From your perspective, the price is simply increased by the tax amount.

No, that’s not the case. Collected sales taxes are offset by paid sales taxes. I think what confused me is that the one account included in the first set up is labelled Income Tax Payable, but seems to be Sales Tax Payable. So I assume I can just change the name of the account so that it doesn’t reference Income Tax (which has a specific meaning in Canada). Using that and the default accounts for collection and payment of the GST (and ditto for PST) seems to be what I need to do. My accountant prefers I have separate accounts for PST and GST, and then subaccounts in each for tax collected on sales and tax paid on purchases. But I can’t find a way to create a GST summary account and a PST summary account if I do that.

If you search the Forum for Canada or Canada Taxes, there have been a number of topics addressing this issue.

OK, I think I`ve figured it out. Thank you for your help. I was getting stumped by having many of my sales being exempt from PST, so realized I have to set up different codes for each scenario.

If you have anything labeled this way, that is because you created or renamed accounts. No account in Manager is named with any reference to income tax by default.

In this case, apply the same tax code to sales and purchase line items. Manager will post both types of transactions to Tax payable. By default, this is a liability account because most businesses owe money. But if your particular situation typically results in the government owing you money, you can reassign it to the Assets group. Either way, the balance of Tax payable will be the net of taxes you collect and taxes you pay. In other words, the offset will occur within that account.

Your trouble will be in reporting GST and PST separately. Manager doesn’t do that yet, so the only workarounds are as described in the Guide I linked to concerning multi-component taxes. Unfortunately, the program allows only a single tax code to be applied. So situations where one component applies but the other does not requires a third (and possibly fourth) tax code to be defined so you can choose which combination of components to apply. This is also described in that Guide. It is awkward and my fondest hope is that improvements in this area will come soon.