As tax time nears, P.E.I. businesses need to mind the details with the HST in full effect
Change can be scary, and businesses in Prince Edward Island were forced to confront a big one when the province introduced a harmonized sales tax (HST) of 14 per cent on April 1, 2013.
That change has ramifications for P.E.I. businesses, which must ensure they don’t run afoul of Revenue Canada when they file their tax returns this April. With tax season just around the corner, here are few tips P.E.I. businesses should keep in mind (courtesy of Sarah Noftell, Grant Thornton’s sales tax leader for New Brunswick and P.E.I.), to avoid unwanted attention from the taxman.
- Make sure your accounting system or process has the new tax codes programmed in, and that it has been updated to account for when the HST came into effect. “If you have an error, you don’t just get it wrong on one sale, you get it wrong on a thousand sales,” Noftell says.
- Ensure your staff has sufficient training in the HST rule changes and in how to calculate them. “If staff are used to seeing invoices come in with five per cent on them, do they know what to do when they see 14 per cent? Make sure they are capturing the right amount of tax to claim.”
- Watch out for how tax is charged on any recurring payments that don’t generate invoices. “Maybe you have a monthly lease payment that comes from your bank account or you might automatically invoice customers for specific things each month,” Noftell says. “You will want to make sure as of April 2013 you’ve switched from five to 14 per cent, and if applicable, stopped charging the provincial sales tax.”
- And about the provincial sales tax: don’t throw out the old documentation yet, Noftell warns. “There is still potential for provincial sales tax audits for a number of years to come. It’s not a green light to destroy all your old records. You need your documentation and you need to keep it in order.”