When to Hire an Accountant to do your Taxes

By Randall Orser | Personal Income Tax

NX_accountant_worriedfront TNDo you fill out your own tax forms, use a software program to file your taxes, or have a tax service do it for you? Each of these methods is a good option, but sometimes it is better to work with a tax preparer. A tax preparer has specialized expertise and knowledge of tax rules making them the perfect candidate to accurately complete tax forms. The more complicated your taxes are, the more likely you will need the help of an experienced preparer.

If expense is not a concern for you, having a tax preparer file your taxes for you may be the best decision. You shouldn’t have to worry about your taxes being filed correctly if you are working with an experienced tax preparer. You also don’t have to spend any time calculating details and filing tax forms yourself. Whether you fill out a one-page form or you have a stack of forms to fill out, a preparer will be able and willing to do it for you. However, if you don’t want to throw away your money, simple forms can be done with software programs, through a tax service, or on your own much less expensively.

If you have several sources of income, such as a side business, stock investments, income properties, and other income sources, it is a good idea to have a preparer do your taxes for you. These types of income sources can be very complicated and require several extra forms to be filled out. A good preparer will have experience with it and can ensure that it will be done correctly and efficiently. Filling out a mountain of different forms can be tedious and confusing. One mistake can carry problems throughout the forms. Have someone who knows what they are doing complete it for you. On the other hand, if you only have one W2 form, you should be able to do it yourself.

Whether or not you should have a preparer do your taxes depends on what forms you need to file and how confident you feel doing them yourself. If you like to speed through things and don’t like looking over your work, you could miss important deductions and make costly mistakes. A preparer will ensure things are done right. Precision and detail are important when filing taxes to avoid mistakes and penalties. The more complicated the forms are, the more precise you need to be. If you feel uneasy about it, hire a preparer to do it for you. With a preparer, you are paying for expertise, precision, and accuracy.

What Happens To Capital Losses At Death?

By Randall Orser | Personal Income Tax

Capital gain and losses TNAs the old saying goes ‘there’s two things inevitable in life: death and taxes’. Sadly, for most of us they will happen in the same year. We’re not going to get into all of the issues surrounding a deceased taxpayer (there are many); we’re just going to concentrate on capital losses. You have a capital loss when you sell, or are considered to have sold, a capital property for less than its adjusted cost base plus the outlays and expenses involved in selling the property.

In the year of death, many items are considered ‘deemed disposition’. Canada Revenue Agency (CRA) is basically saying that you sold them at the time of death. Capital losses may have also occurred, or the deceased may have capital losses from prior years that were unused. These capital losses, usually, can only be written off against capital gains. In the year of death, if there is any capital losses left over after using them against capital gains, the balance can be used against other income.

CRA allows for two methods to apply a net capital loss that happened in the year of death, you could use either Method A or Method B.

Method A

You can carry back a 2014 net capital loss to reduce any taxable capital gains in any of the three tax years before the year of death. If you are applying it against taxable capital gains realized in 2011, 2012, or 2013, you do not need to make any adjustment because the inclusion rate is the same in all three years. The loss you carry back cannot be more than the taxable capital gains in those years. To ask for a loss carryback, complete “Section III − Net capital loss for carryback” on Form T1A, Request for Loss Carryback, and send it to your tax centre. Do not file an amended return for the year to which you want to apply the loss.

After you carry back the loss, there may be an amount left. You may be able to use some of the remaining amount to reduce other income on the final return, the return for the year before the year of death, or both returns. However, before you do this, you have to calculate the amount you can use. From the net capital loss you have left, subtract any capital gains deductions the deceased has claimed to date. Use any loss left to reduce other income for the year of death, the year before the year of death, or for both years.

If you claim any remaining net capital loss in the year of death, you should claim it as a negative amount in brackets at line 127 of the final return.

Do not use a capital loss claimed against other income at Line 127 in the calculation of net income for the purposes of calculating other amounts such as social benefit repayments, provincial or territorial tax credits, and those non-refundable tax credits requiring the use of net income.

Method B

You can choose not to carry back the net capital loss to reduce taxable capital gains from earlier years. You may prefer to reduce other income on the final return, the return for the year before the year of death, or both returns. However, before you do this, you have to calculate the amount you can use.

From the net capital loss, subtract any capital gains deductions the deceased has claimed to date. Use any loss remaining to reduce other income for the year of death, the year before the year of death, or for both years.

If you claim any remaining net capital loss in the year of death, you should claim it as a negative amount in brackets at Line 127 of the final return.

Example

A man died on June 20, 2014. You have the following details about his tax matters:

  • Net capital loss in 2014:         $11,000
  • Taxable capital gains in 2012: $4,000
  • Taxable capital gains in 2011: $2,000
  • Total capital gains deductions claimed to date: $4,000

He did not claim any capital gains deductions for 2011 or 2012.

You can use Method A or Method B.

Method A

If you choose Method A, you can use the net capital losses to reduce his 2012 taxable capital gains to zero ($11,000 − $4,000). Then, you can use the remaining balance of $7,000 to reduce his 2011 taxable capital gain to zero ($7,000 − $2,000).

After you subtract his capital gains deductions ($5,000 − $4,000), you still have $1,000 left to reduce the man’s other income for 2014 or 2013 or for both years.

Method B

If you choose to use this method, you will first deduct his capital gains deductions of $4,000 from his net capital loss in 2014 of $11,000. You can now use the remaining $7,000 to reduce the man’s other income for 2014 or 2013, or for both years.

If you claim any remaining net capital loss in the year before the year of death, you will need to complete Form T1-ADJ, T1 Adjustment Request, or send CRA a signed letter providing the details of your request.  Send your Form T1-ADJ or letter separately from the deceased’s final return. Applying a 2014 net capital loss to a previous year may reduce any capital gains deductions the deceased claimed in that year or a following year.

Four Questions to Ask Before Starting a New Business

By Randall Orser | Small Business

Survey On Clipboard Shows Very Good TNIn light of the recent economic recession, when companies all over the country are downsizing and finding a good job is next to impossible, millions of people have taken to starting their own businesses and are hoping to earn a considerable income through their own efforts. While many individuals have succeeded as small business owners, some were met with failure simply because of inadequate planning. The truth is that starting a new business takes a lot of time and effort; you need to consider certain factors before launching a business. If you’re toying with a business idea you think is going to be a hit, ask yourself a few questions before you take the plunge into the business world.

  1. Do you have time to run your business? So many people mistakenly assume that just because they will be running their business from home, it means they will have a lot of free time on their hands. On the contrary, quite the opposite is true. Most home-based business owners need to work a lot more and a lot harder to match the income they used to make when they were working in a traditional office. This is particularly true during the first few months of running the business. Once your business has taken off, however, you may be able to relax a bit and work less hours. Before this happens, you will probably have to work extra long hours, so that’s an important factor you have to consider.
  1. Are you qualified? Quite often, people think they have a brilliant business idea and find out too late they aren’t qualified to offer that particular service. Let’s assume you’re a mom of four and you’ve just started a business that involves child care. Being a mother of four, you’re quite confident in your capabilities in this field. Your potential clients, however, are likely going to look for an individual who is not only experienced but certified in child care as well. In this case, you will have to get the certification or come up with another business idea where your skills will be put to better use.
  1. Do you have room for your business? Many home businesses start out small. Once your business takes off, however, you may find yourself in need of bigger space for your supplies or your products. Unless you have extra space in your home (e.g., a spare room or garage), you may soon have to expand outside by renting storage space, which is obviously an additional expense. If you don’t want to deal with such problems, think ahead when you are still in the business planning stage.
  1. Are you financially capable of running the business? Money is one of the most significant factors you have to consider before starting a business. Many people underestimate the costs required to set up a business. Even if they take out a loan, sometimes it isn’t enough to cover all the initial expenses. To avoid these hassles and to increase your chances of business success, plan your finances thoroughly.

Do I Have To Claim Income From Renting To My Mother-In-Law?

By Randall Orser | Personal Income Tax

Family Key Means Blood Relation Or Relatives TNYou’ve taken the plunge and renovated the basement for mom. Fortunately, she’s able to help pay for the new suite. However, now you’re worried that the monies she’s paying are going to get added to your income; or worse, you’ve put lots of money into the rental unit and you may not be able to write-off the loss.

Canada Revenue Agency (CRA) will look at the transaction and determine whether you are dealing with each other at Arm’s Length. Arm’s Length means a relationship or transaction between persons who act in their separate interests. Related persons are not considered to be dealing with each other at arm’s length. Related persons include: individuals connected by a blood relationship, marriage, common-law partnership, or adoption (legal or in fact); or a corporation and an individual, or two corporations, may also be related persons.

Unrelated persons might not be dealing with each other at arm’s length at a particular time. For example, one person is under the influence or control of the other, or the persons are considered to be acting together. Each case depends upon its own facts.

Small Business Technology Spending

By Randall Orser | Small Business

Technology in the hand of businessmen TNSmall business owners can find many ways to spend their capital on the latest business software applications. These solutions are designed to automate a small business so it can become more efficient and achieve other business priorities. To grow your business, you must invest in software solutions. Consider these four reasons for improving your small business capacity through business technology acquisitions:

  1. You can stop assuming you know what technology solutions work best for your company. As a small business owner, you need good advice from IT experts. Sometimes you have to follow an IT expert’s recommendation to invest in technology upgrades, especially if your servers and software solutions are obsolete.
  1. You can prioritize technology spending along with other types of non-recurring expenses in the company budget. If you don’t prioritize tech spending, you can hold your company back from increasing its capacity in important areas like marketing. You might neglect certain segments of the market, such as customers who do business on their mobile devices. Other businesses come along with better tech solutions and provide the capacity consumers want. You lose your market share.
  1. You don’t want to miss opportunities to acquire IT technologies with a quick return on investment. Your competitors might risk more capital after studying the potential ROI of each business solution. They develop business plans around a timeline for recovering their investment. When you don’t invest in tech, other companies surpass you in business intelligence. Their ROI includes employees with access to better technologies. These employees make better decisions, which leads to higher overall performance.
  1. You should be realistic about how your revenue streams change over time. If you aren’t bringing in the revenue you projected a few years ago or even last quarter, that’s okay. Technology spending is part of your business plan, and you scale it down in proportion to your drop in revenue. Study available technology solutions. Pick a solution that will help you increase your revenue streams in time to change the downward trend.

There may be an upswing in the economy that enables you to increase tech spending; waiting for the upswing for big purchases will hurt your market position. Remember that business technology automates important functions in a small company, enabling employees to make good decisions and to focus more on innovation.

If you aren’t sure how to build your business intelligence through technology purchases, hire the services of an IT consulting firm specializing in small business clients. Get the best tools for your business!

I Can’t Pay CRA What I Owe, What Do I Do?

By Randall Orser | Personal Income Tax

Debt Word And 3d Character Shows Bankruptcy And Poverty TNHopefully you never run into a situation where you can’t pay the taxes you owe, whether it’s income taxes, sales taxes or other. However, things happen in life and sometimes you just can’t pay the bill in full. What should you do if you ever run into not being able to pay?

The first thing to do is not panic. Too many times people fall into a panic and think horrible things when they can’t pay. Worse, they don’t file because of the horrible balance they think they’ll owe. Even if you can’t pay all of your balance owing right away, you should still file your return by the deadline to avoid a late-filing penalty.

If you can’t pay the full amount of taxes you owe, you may be able to make a payment arrangement with Canada Revenue Agency (CRA). If they agree that you are unable to pay in full, an agent can work with you to develop a plan to help you pay your taxes.

If you cannot pay your balance owing on or before April 30, 2015, CRA will accept a payment arrangement only after you have reasonably tried to get the necessary funds by borrowing or rearranging your financial affairs. If the CRA agrees that you are unable to make a full payment, an agent can develop a plan with you to help you pay your taxes.

I have found that many times you can just send a letter with a payment arrangement and they will accept it; as long as it’s not taking forever to pay the bill. CRA usually likes the balance owing to be paid within 6 months though will accept 12 months.

If you do not deal promptly with your tax arrears, the CRA can take serious measures including legal action such as garnishing your income or your bank account or initiating other legal action such as seizing and selling your assets.

If you’re really in the weeds, check out The Voluntary Disclosures Program. This program allows taxpayers to come forward and correct inaccurate or incomplete information or to disclose information they have not reported during previous dealings with the CRA. Taxpayers may avoid being penalized or prosecuted and only pay the taxes or charges owing, plus interest, if they make a valid disclosure.

A few years back there was a care home in Kamloops; this was a place that looked after the elderly who couldn’t care for themselves. The owner admits that his bookkeeping was not up to snuff (doing it himself) and that he got behind. They tried to work with CRA on a payment plan; however, CRA demanded $20K up front before they would even make a deal. Sadly this was not possible and the care home had to close.

Once you get behind on your tax payments it can be hard to get back on track. However, talk with CRA and let them know your situation, they may just help you with a plan to pay it all back.

Determining Your Hourly Fees

By Randall Orser | Small Business

Time Money Signpost Showing Hours Are More Important Than Wealth TNAs an entrepreneur, are you concerned about whether your hourly fees are enough to cover your own salary, your expenses and are enough to secure a reasonable profit? If so, don’t despair. A number of entrepreneurs and small businesses have difficulty determining their hourly charges. Most have these issues when their new business venture first gets off the ground. Only later do they find out that their hourly charges aren’t enough. As such, it’s imperative to clearly define your enterprise’s hourly fees. This involves taking steps to ensure your hourly fees not only cover your salary, but that they cover your direct expenses, indirect expenses and provide a profit. So, where to begin?

A simple calculation to determine hourly fees

The calculation to determine hourly charges is quite simple. Hourly charges must account or the entrepreneur’s salary, their direct expenses, their overhead and their profit. When looking to determine your hourly salary, think of the salary you would be paid if you were an employee of a company. Next, your direct expenses and overhead must be accounted for within your hourly charges. Finally, you’re in business to make a profit. Don’t forget about the importance of securing the profit you’ll need to finance your enterprise’s future growth. It’s never enough to just cover your salary and expenses. You must account for profit in order to secure your company’s future. That profit comes from adding your hourly salary, direct expenses & overhead and dividing this total by your desired profit. We’ll provide the calculation below and then analyze each portion of the calculation in detain.

Calculation: (salary + direct expenses + {overhead or “indirect expenses”}) / profit

Coming up with your hourly salary

Don’t shy away from your hourly salary. If you’ve decided to move forward with your own business, then you’re well within your right to have the same salary, if not more, than you would if you were working for another company. This may require you to research your given profession. Concentrate on defining your hourly salary relative to your experience, where you live and where your customers will be located. Again, it might require some analysis, but you should have plenty of information at your disposal.

Understanding the difference between direct & indirect expenses

Determining your hourly fee means you must understand the difference between direct and indirect expenses and how both play a role in your enterprise’s cost structure. First, direct expenses are those expenditures that go directly to a specific job, product or service. In essence, these expenses include the raw material, parts and labour that cover the production of a given product or the work involved in providing a given service. Indirect expenses are those expenses that are seen as above and beyond a company’s direct expenses. These would include those costs pertaining to gas, equipment and car maintenance, taxes, insurance and other miscellaneous support costs. Indirect expenses are expenses that can’t be attributed to any one product or customer, but who are still an essential part of running a business.

  • Direct expenses: Expenditures that go directly to a specific job, product or service.
  • Indirect expenses: Support expenses that can’t be attributed to a specific job or product, but who are essential in running a business.

The Role of Overhead

Overhead essentially summarizes the company’s indirect expenses. These overhead expenses pertain to those support expenses that are an essential part of the company’s operations. As an entrepreneur, you’re likely just concerned with covering your own time. However, as your company grows, you may need to hire employees. Their salary will become a part of your company’s overhead, as they fall under those indirect expenses that are an essential part of managing your business. The easiest way to calculate a company’s overhead is to take indirect expenses and divide them by direct expenses. Most companies will track their expenditures over a given period. Some may track expenses by week, while others will focus on monthly or quarterly periods. In this case, it really depends upon the size of the enterprise and the fluctuations in those expenses. Small companies have more flexibility in tracking their overhead because they can immediately determine the impact of any minor changes. Larger enterprises typically review their overhead over a given quarter or year. The calculation for overhead rate is shown below.

Overhead rate = indirect expenses / direct expenses

The key is to determine your overhead rate and then use that rate to determine your indirect expenses for each hour charged to customers. This simply involves taking the overhead rate and multiplying it by your direct expenses. Why use overhead when you can simply track indirect expenses? Well, the fact is, as your enterprise grows, you’ll have to track your overhead more closely. Gradually, your overhead will likely level out and become more consistent over time.

The importance of profit

Never forget the importance of securing a profit within your hourly fee. Profit finances expansion and secures your enterprise’s long-term future. Most entrepreneurs simply cover salary and expenses. Therefore, define your enterprise’s profit and be sure to include that profit within the fees you charge your customers.

An example of working out the hourly fee

Let’s assume you work 50 hours a week and that you’ve defined your hourly salary to be $50.00. In addition, you’ve tracked your direct and indirect expenses over a period of one week. Your direct expenses total $3,000.00, while your indirect expenses total $1,000.00. Your direct expenses would be the $3,000.00 divided by 50 hours, or $60.00 an hour. Your overhead rate would be your indirect expenses of $1,000.00 divided by your direct expenses of $3,000.00. This would give you an overhead rate of .33 or 33%. Now, you could just use your indirect expenses of $1,000.00 and divide it by your 50 hours per week. This would give you $20.00 an hour in indirect expenses. Or, you could use your overhead rate of .33 and multiply it by your direct expenses, which would give you $990.00 of indirect expenses, or $19.80 for every hour charged. For this example, we’ll stick with the $20.00 an hour as summarized by our indirect expenses.

  • Salary: $50.00 an hour
  • Direct expenses: $60.00 an hour
  • Overhead or indirect expenses: $20.00 an hour
  • Profit: 20%

Calculation: (salary + direct expenses + {overhead or “indirect expenses”}) / profit

($50.00 + $60.00 + $20.00) = $130.00 / .80 = $162.50

In this case, you should charge your customers $162.50 an hour.

Now, all of this may seem confusing, but the basic approach is to determine your salary, add your direct and indirect expenses and then determine your profit. Be comfortable with tracking your enterprise’s overhead as you will likely be hiring some help in the future. By tracking overhead, you’ll become more comfortable with how it impacts your hourly fees. If it’s simpler to track your indirect expenses at the beginning, then do so. However, be cognizant of the fact that as your enterprise grows, you’ll have to enact strategies to mitigate your expenditures, and that means to reduce your company’s overhead.

As Self-employed, Do I Register For WorkSafeBC?

By Randall Orser | Personal Income Tax

In British Columbia we call workers’ compensation, WorkSafeBC (WCB). This is probably one of the most red-taped organizations that a business can deal with, especially if you deal with food, construction, and other businesses that deal with even somewhat hazardous workplaces. Unfortunately, it also catches small businesses that are basically an office and nothing more.

When you’re covered by WorkSafeBC insurance, you’re protected against lawsuits from injured workers. If a worker is injured or contracts an occupational disease while on the job during the course of employment, WorkSafeBC covers the worker’s medical and wage-loss costs. Of course, WorkSafeBC will do its best not to have to ever pay out anything.

Sole-proprietorships or Partnerships

If you are an unincorporated business, or sole-proprietorship, then you are not required to register for WorkSafeBC (WCB). However, if you do work in the construction/renovation industry you really should; otherwise, your clients end up having to pay it on your behalf. That’s another beauty of WCB, if you’re not registered and contract your services to others, then they are required to pay WCB on the monies they pay you to WorkSafeBC.

For example, let’s say you contract out to ABC Company Ltd. for $40,000 in one year, ABC would have to pay WCB on that $40,000 at whatever rate they are at (for construction could be 5%+) for the year. Many companies in construction require all subcontractors to be registered for WCB.

This is called Personal Optional Protection (POP) is optional workplace disability insurance for individuals not automatically covered under the Workers Compensation Act. POP will cover your lost salary and medical expenses if you are injured on the job or if you contract a disease as a result of your work.

If you’re not working in renovations/construction, then you’re much better off to get short and long-term disability protection via an insurance product than WCB.

Corporations

Incorporated companies differ from unincorporated companies because the shareholders, directors, officers of the corporation and principals (officers who also own shares in the corporation) who have any degree of activity in the operation are considered to be workers, and as such, are entitled to compensation. They cannot purchase Personal Optional Protection, WorkSafeBC’s optional insurance plan. Therefore, principals of corporations must register their companies and declare the number of principals/active shareholders and their total earnings.

The only exception to mandatory registration for an incorporated company is when the corporation is deemed a “personal service corporation”. This is when no other help is employed and, but for the incorporation, the principal clearly falls into the worker category. The exception also applies to situations in which there is a degree of common ownership between two companies and the sole function of the principal firm is to provide labour to another firm’s operations (e.g. administration or management function).

WorkSafeBC is also trying to get draws by shareholders declared as earnings, even if your corporation owes you money and you’re just paying it back.

Homeowners

If you employ a domestic worker (e.g, a maid or housekeeper), home care nurse, nanny, construction or repair worker or contractor, or a gardener or landscaper on a regular basis you may be required to register for insurance coverage with WorkSafeBC. You do not need to register if you hire a person or business:

  • For less than 8 working hours per week (e.g. if you hire someone to clean your home for four hours each week)
  • To care for children before/after school for less than 15 hour per week
  • Through an agency registered with WorkSafeBC and you pay the agency directly
  • You employ a person or firm to do a specific job or jobs for a period of less than 24 working hours (i.e. if you hire someone to paint your house and the job takes 20 hours)

Once you start employing people, you need to register for WorkSafeBC you don’t have a choice. Talk to your bookkeeper or accountant whether you have to register or not, and how to go about doing so.

Three Characteristics Of Critical Thinking In Business

By Randall Orser | Small Business

bulb TNOne of the biggest challenges in business today is deciding what information is needed to make the best business decisions. With the extraordinary amount of information available, it is important to have excellent critical thinking skills to apply to the challenge. There are several characteristics of critical thinking that play an important role in making business decision.

First it is important to understand what the term “critical thinking” actually means. What is the definition? What are the many components, the hallmarks, the characteristics of critical thinking? How do you know it when you see it; how do you know when you have it, or don’t?

Critical thinking is disciplined thinking that is clear, rational, open-minded, and informed by evidence. Critical thinkers have the ability to critically view themselves. A rather lofty but informative definition used by The Critical Thinking Community, is “the awakening of the intellect to the study of itself.”

Here are characteristics of critical thinking that apply to business.

  1. The ability to use reason rather than emotion – this requires evidence, data, facts, a full accounting of the information that surrounds your thinking. When you challenge your own thinking you will find where you are relying on emotions and not facts.

This is absolutely critical in business today. Businesses must use reason, not emotion, to succeed. There are many cases, particularly with entrepreneurs and start-up businesses, where emotions dominate the thinking. People become so excited and take such ownership in their new idea that they lose sight of the facts and data that support the best decisions. Taking a product to market only to find out there is no market, shows flawed thinking. “If you build it they will come” works in movies but not in business.

Successful businesses require critical thinking up and down the organizational structure. The challenge today is that we have too much information. Critical thinking helps to decide what information is relevant and why.

  1. Always keep an open mind – this means you listen, take in other views and seek alternatives and new ideas. Good judgment comes when you recognize the merit of other views and ideas, and factor them into your own thinking. With open mindedness you need the good judgment to know when you have the information you need. Do not get “analysis paralysis”.

Successful executives have to keep an open mind. To be effective, they have to listen well. Every day people bring executives their views, recommendations, facts, data and opinions. The higher an executive goes in an organization the more information they have to consider to inform their decisions. Having a reputation for open mindedness can impact every stage of a career. People equate open mindedness with fairness. Effective leaders, whether they manage a department, lead a work group, direct a division or run a company, build employee and colleague trust when people know they are being heard and that their views are being considered.

  1. Take a disciplined approach – with discipline you become detail oriented and are comfortable with a lot of information. In fact, you meticulously seek the most relevant and appropriate details and do not make decisions without them. With discipline comes the ability to see the connections between ideas. Solving problems is approached systematically. Identifying, constructing and evaluating arguments become second nature.

Discipline in business and in careers is highly regarded. Discipline leads to focus. When you hear “she really knows her facts”, “he really thought through this issue”; “people admire her for good decisions”, comments are reflections of critical thinking. When we discipline our minds we get rid of clutter. We leave space for better critical thinking. Yes, you get better at it over time.

There are other, more reflective characteristics of critical thinking that should be applied in business today. Critical thinkers are more self-aware. They know their own biases and recognize built in prejudices and assumptions. They approach what they do with honesty and confidence. These qualities are also reflected in their personal lives.

Today, more than ever, critical thinking is an essential part of successful businesses and successful careers. Using reason rather than emotion does not mean you cannot be passionate about your work. It does mean than when it comes time to make important decisions you put the emotion aside. Open mindedness allows you to see opportunities no matter how these opportunities are presented or by whom. With a disciplined approach comes the acumen to identify the right information for the situation and knowing how to use that information. When these critical thinking characteristics are put together they are a powerful business skill to be admired.

What Amount Of Sales Do I Have To Register For PST?

By Randall Orser | Personal Income Tax

Taxes File On Laptop Shows Taxation TNIn it’s infinite wisdom, the British Columbia government reverted back the Provincial Sales Tax (PST) back in April 2013. So, now we have to decide if 1) you’re supplying a taxable good or service and 2) what are you annual sales. This post is mostly about the amount of sales that you need to make to register for the PST.

Lets say that you’ve already determined that you have a good or service that is subject to the PST. You haven’t registered yet as you’re not sure what your sales will be for the following year.

You are not required to register if you qualify as a small seller. As a small seller, you do not charge or collect PST on sales; however, you are also ineligible for certain PST exemptions, such as the exemption for goods purchased for resale or for incorporation into other goods for resale. You have $10,000 or less in gross revenue from all retail sales of eligible goods, software and services for the previous 12 months, and your estimated gross revenue from all retail sales of eligible goods, software and services for the next 12 months is $10,000 or less

If you qualify as a small seller, you have the option of registering with the ministry to collect and remit PST. Registering for PST can be advantageous because it allows you to purchase goods for resale (or for incorporation into other goods for resale) exempt from PST. If you choose to register with the ministry, you will no longer be considered a small seller and must charge and collect PST.

This is where people get confused, once you register to collect the PST, you must always charge PST on your taxable sales. Even in those years where you dip below the $10,000 you MUST still charge PST as you are registered, no exceptions. If you’re finding you are not meeting the $10,000 limit over a couple of years, and have no plan to get over that amount then you can deregister. If you do deregister, you will have to now pay PST on anything you purchase, even if it’s for resale.

In the end, I think it’s best to just register for the PST, and get used to charging it. Your clients are used to paying it, and, many times, people get confused when they’re not charged taxes; perception is everything in business.

Examples of When You’re Required to Register

In the ordinary course of your business, you:

  • Sell taxable goods like alcoholic beverages, motor vehicles, boats, building materials, household or office furniture
  • Lease taxable goods like motor vehicles, tools and equipment, aircraft and art work
  • Provide services to taxable goods like:
    • Repairing or maintaining automobiles, knives, watches, TVs
    • Applying protective treatments like fabric protection
  • Sell software
  • Provide legal services or telecommunication services
  • Provide four or more units of accommodation

Examples of When You Don’t Need to Register

  • You sell only non-taxable or exempt goods like food for human consumption, bicycles or children’s clothing
  • You provide only non-taxable or exempt services like transportation or dry cleaning services
  • You’re a wholesaler
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