Using Technology to Enable Commodity Tax Management
Currently, many businesses are still relying on manual input as part of their commodity tax process. As indicated in our March 2014 article, one of the most common CRA audit issues deals with clerical and reconciliation errors, which may be reduced, if not eliminated, with some form of automation of the process. Choosing the appropriate software can go a long way in helping to mitigate manual errors. Software such as QuickBooks can even allow you to file your GST/HST returns directly from your software to help eliminate any clerical errors on filings.
Realistically, GST/HST errors can happen at any point in the accounting cycle; from having the wrong tax rate entered for your new customer located in British Columbia or Quebec, to a new product that is zero-rated being classified as taxable when you add the SKU to your system. We recently encountered a situation whereby the client had correctly set up their software to charge Federal and Provincial tax rates on each invoice, however the software was allocating the taxes into the incorrect general ledger account, causing the tax collected to be missed in the remittance until the problem was detected. Therefore, even if your accounting program is charging the correct rate, you also need to ensure all of the tax is being accounted for when the return is being filed. Ensuring your company has the correct policies and procedures in place to consider the GST/HST impact when a new customer or new product is entered into your system, can go a long way to having accurate reporting with the Canada Revenue Agency. Incorrect set up can lead not only to a costly fix but also to a potential CRA audit and reassessment with interest and penalties if they believe there was unremitted GST/HST.
Having your software programmed accurately can also help reduce common GST/HST omissions such as ensuring the 50% ITC restriction on meals and entertainment is automatically being dealt with or helping to capture the restricted input tax credits for those companies subject to the RITC restrictions. From our experience, many companies are doing these calculations manually, if at all.
Technology can be your best friend or your worst enemy if not programmed correctly. Given the different rates and the recent changes in the GST/HST across Canada, has your company reviewed your software programming to ensure all of these changes are being recorded properly? DJB’s Business Support Services group, along with our Commodity Tax advisory team, can help to ensure that your company’s GST/HST needs are running smoothly in your program, freeing up your time to grow your business.