Tax code for Canada


I’m trying to figure out how the tax settings work. There is no setting for Canada :(, but I created a custom one. But the tax is categorized as a liability, and I cannot make it an expense. Here we just pay tax upfront on goods we buy, so it needs to be an expense instead of a liability. Is there any way to do this? Or can the program be tweaked so I can put the tax account where I need it?

Thanks so much!

Manager doesn’t contain in-built tax codes for Canada yet.

But you can create custom tax code. Now, the reason tax is posted to liability account is that when you make a purchase, the tax is not an expense, it can be recovered.

If you are not charging tax and you cannot claim tax back on purchases, then you shouldn’t be using tax codes at all.

Okay… but I am still paying tax on products I need to buy for the business, and will not be able to get all of it back (though for sure some of it). So, should I just include that in the purchase price of the item?
Thanks for your prompt answer!

What do you mean by this? Maybe you need to be more specific what tax are you paying (e.g. GST) and under what circumstances the tax will be paid back to you.

Sorry. I’m really new to all of this.

I am paying GST. It is paid at the time of purchase to the business, which gets it to the government. At tax time when I file, if I have not earned above the government threshold all or some of the GST I have paid will be refunded (depending on how much the business earns). Right now, it is looking like a portion will be refunded.

That is why I would like the tax to be categorized as an expense; it is not a liability, because I owe nothing to the government.

The solution to this is not to use Manager’s tax capabilities at all. Instead, when you enter a purchase through Spend Money, separate the goods/services being purchased from GST on separate lines. Allocate the goods/services to whichever account they belong to. Allocate the GST to an expense account named something like GST paid on purchases.

Conceptually, this is like buying nuts and bolts to consume on jobs, where the government pays you back for the nuts if you make less than the threshold. At the end of the year, you will have totals for nuts and bolts. You include that information on your tax return. The actual reimbursement will be a transaction in the following tax year, so it doesn’t affect this year’s results.

Thank you! That’s what I needed. So simple… right under my nose :slight_smile: