Seasonal Business GST/HST Filing with QuickBooks

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This article was supposed to be titled, “What I Learned from a Client: Filing GST/HST with QuickBooks Desktop for Seasonal Businesses,” but Insightful Accountant's publishing site doesn't support titles that long. So, the editors had to cut the title short.

Happy Summer, Canadian accounting professionals. Is it hot enough for you? If you’re looking for relief from the heat, I’m going to tell you a very cool story about QuickBooks Desktop and GST/HST for seasonal businesses.

I like to think I’ll never stop learning. I especially love learning from my colleagues. And sometimes, I learn from my clients. I’m not ashamed to admit that. Here’s what happened.

This client is a GST/HST registrant client who files monthly and has a highly seasonal business. Like many seasonal clients, he owes GST/HST during some filing periods and has refunds coming to him during others. (Does this sound familiar?)

Let’s review how QuickBooks Desktop handles clients like these. Since I’m writing this during the dog days of summer, let’s pretend and use Esther’s Pool Covers, a GST/HST registrant that files GST/HST monthly. They’re based in Ontario, so they’re very seasonal.

During the off season, say, April, when a company has a GST/HST refund coming to them, using the File Sales Tax function ends up creating a receivable (conjured up by a special general journal entry) from the customer Receiver General – Receivable for the amount of sales tax refundable ($65, 130, in this example).

Here it is in the Open Invoices report:

But then, the high season starts suddenly. And during that high season, say, May, when a company owes GST/HST, using the File Sales Tax function ends up in creating a payable (the same type of general journal entry) to the vendor Receiver General for the amount of sales tax owed ($1,300,000, in this example).

Here it is in the Unpaid Bills Detail report:

We have a payable to the CRA for the GST/HST owing, but the GST/HST refund (which really reduces the payable) is sitting elsewhere in the receivables.

But that’s not what happens in real life. The CRA (Canada Revenue Agency) doesn’t separate what you owe them from what they owe you. It’s all part of one account, and it’s all part of the balance that is owed, either positive or negative.

More than likely, my client was getting ready for the busy season, so maybe he was late in filing his April GST/HST return. It was no biggie, because he was getting a refund, right?

But then May came along, and he realized he owed a ton of money for GST/HST and he filed that on time.

This client, being highly seasonal, has had to deal on the phone with the CRA for GST/HST before. So this time around, he was on the phone with an agent for the CRA, who told him to issue a payment for $1,300,000 less the refund of $65, 130, or $1,234,870. 

I mean, why would the CRA issue a refund check for $65,130, if it knew that a payment of $1,300,000 was coming back its way? This would be a pain in QuickBooks Desktop, having to deal with issuing a credit memo (to a clearing account) to zero out the receivable, and then issuing a bill credit for the same amount (to the same clearing account) to reduce the payable. Then, and only then, could you pay the net payable to the CRA.

But my client stumbled onto another solution, which I thought was pretty elegant, and I’m going to share it with you now.

He opened the receivable (actually, it was the general journal entry behaving like a receivable) that was created by filing for the refund, …

…deleted the line related to Accounts Receivable and the Receiver General – Receivable customer…

…inserted a line at the beginning…

…and entered information regarding Accounts Payable and the Receiver General vendor using the same debit amount and hit Save & Close:

Now, let’s look at the results. The Open Invoices report is empty, as we’ve removed the refund receivable:

And we’ve turned that refund receivable into the equivalent of a bill credit, lowering the amount due to the Receiver General vendor for GST/HST owing:

And so, when the CRA agent told my client to issue a payment for $1,234, 870, all we had to do was go into Vendors > Pay Bills, select the $1,300,000 bill owing, and click on Set Credits for the $65,130 bill credit that was available, and proceed from there to pay the net amount of $1,234,870.

This resulted in a bill payment check (which could have also been used to reflect an electronic payment) the way we wanted to the Receiver General:

The Bill Payment Stub provided the correct details, so I’m deliriously happy.

That was a cool and elegant workaround, and perfect for summer.

And that, my friends, was what I learned from my client.

Esther Friedberg Karp, MBA is the owner of EFK CompuBooks Inc. (DBA CompuBooks Business Services), a 20-year old firm located in Toronto. She holds certifications in both the United States, Canada and the United Kingdom. She has clients around the world that she works with on QuickBooks setup, conversion, training, troubleshooting and customization services to end users, as well as training for accounting professionals.

Ester has been a member of Insightful Accountant's “Top 100 ProAdvisors” since the inception of the awards, and was recognized as our “Top International ProAdvisor” in 2015. Esther frequently contributes articles of both a U.S. and Canadian flavor.