Capturing GST/HST from shipping costs

[coxengines]

We mail at least 6,000 Light & Small packets/year and, in the past, did not bother claiming the GST as ITC. However, with the implementation of the HST, the $$'s are larger.

Is there a good method of bulk capturing the HST paid on shipping? We create labels 99% via Paypal shipping.

Bernie

[pierrelebel]

In the good old days, every bookkeeping entry for an expense (such as postage) had four columns:

Transaction price - amount went to proper expense journal
GST - amount went to suspense GST account for ITCs
PST - amount went to proper expense journal
Total

With HST, only three columns are required

Transaction price - amount goes to proper expense journal
GST/HST - amount goes to suspense account (for ITCs)
Total

[coxengines]

Pierre, I know 😄

However, we don't enter every single shipping label transaction as that is too much work.

We have been posting net Paypal proceeds to our bank account as revenue (one entry per deposit). At the same time we have been downloading 4 different PP reports every month (monthly summary - daily summary - complete details - funds transferred out) and storing them electronically. This way an auditor will have a record of every penny that went to and from our PP accounts.

Although we do not get an accurate picture of shipping expenses, for income purposes it's the same in the end.

What I am looking for is a way to select only GST/HST amounts on the Paypal site so that I can log en bloc every month.

Bernie

[craftycatsattic]

It's a very good question and from my own experience (unless someone can point out the wiser), I have found that the only time you actually see the amount of tax you pay is right before you print your label. If you check your transaction receipt or log entry at paypal, it does not indicate the amount of taxes paid. I wonder if that is even legal?

[coxengines]

Correct and that is why I ask. the HST is shown only when the label is generated on-line. One can still retrieve and print that part later but for 30 or 60 cents a pop I question the value.

But then 500x / month does add up to at least $150/month and we might just have to go the extra effort. When the tax rate was 5% we forfeited it but at 12% it's beginning to add up.

Bernie

[coxengines]

Ok, so it seems there is no easy solution.

Then, my question is how do you guys and gals account for the tax? Do you simply print out the relevant Paypal page every time that you create a label and put that piece of paper in your books?

Bernie

[pierrelebel]

Have you contacted PayPal and asked them?

As the supplier, it is their responsibility to provide a detailed invoice including whatever GST/HST is being charged.

In fact you do not need a detailed invoice. A monthly summary of charges and taxes would do just fine.

I do not have the problem since I do not use PayPal for postage and never, ever, will.

[coxengines]

Pierre,

I will call PP and ask. The monthly summary is what I am after and not the per-transaction breakdown.

Yes, you sell stamps; hence likely ship plenty per "lettermail". Here it's almost 100% light and small packets.

PP captures receiver mailing address and masks postage, both of which work in our favour.

Bernie

[coxengines]

OK, Pierre, I just spent the last 1/2 hr on the phone with a rep from Merchant Pro Services.

The end result is that PP does not capture the HST data, there is no way to download it and I just realized that, once the label is printed, the HST "disappears" from the individual records as well.

The only time the HST shows is just before the "Pay" option; which is not really a payment receipt as one could, technically, cancel the transaction, something an astute auditor could point out.

As a former CRA auditor, what would you recommend I do? Also, how far back can one claim GST? Our HST on postage will be about $2,000/year and old GST about $800/year.

I am surprised that no one on these boards besides yourself pitched in here. Does everyone that generates PP shipping labels just eat the tax (like we did for years)?

Bernie

[pierrelebel]

Sometimes, you have to contact the big boys to get some action.

The PayPal country manager is Darrell MacMullin
You can contact him at 416 969 2266 or darrell@paypal.com

May I suggest you print that post quickly before some troll reports it

[pierrelebel]

Let me ask the question on the selling board about how other sellers recover the tax information?

[pierrelebel]

For backgound information, the GST/HST invoice requirements can be found at this http://www.cra-arc.gc.ca/tx/bsnss/tpcs/gst-tps/bspsbch/itc-cti/nvc-eng.html

[pierrelebel]

First you have to determine who is the actual seller of record.

Is it :

eBay who arranged the deal with Canada Post?

PayPal who charges the seller?

Canada Post who provides the actual srvice?

or Pitney Bowes who administers the program for PayPal?

[coxengines]

Thanks Pierre and printed.

I mused over the same thoughts. The PP entry appears as "Payment to Canada Post".

Since postage is under $30, it looks like I can get away by simply filtering and printing a summary of postage paid via Paypal. I was not aware of the rule.

Do you happen to know how far back one can go for GST adjustments? We file monthly and can plonk that into a subsequent month.

Thanks
Bernie

[pierrelebel]

"Do you happen to know how far back one can go for GST adjustments? '

First thing first.

You will need to determine how much GST/HST was paid last year,
the previous year
and so far this year.

You should be able to get that information from senior management at PayPal. Or at least, they can get the wheels in motion.

However, looking at the BIG picture, eBay really has a problem here if they set up a system to save money for sellers while the savings are wasted in taxes. It is eBay's responsibility to fix the mess.

I am glad I do not deal with the PayPal postage.

An alternative is to call Revenue Canada tomorrow and ask them how to solve the issue! It may take a few months but the menure will eventually hit the fan. 😉

[fatdane]

I have used the Payola shipping on a few items, and as I remember it at some point in the process the GST/HST was identified but then went away, I can not remember if it was added onto shipments going outside Canada.

If the GTS/HST has not been applied to items going outside Canada you could get a number for GST paid by downloading a total for the amount paid to Canada Post for shipments in Canada, then take that total and get the GST part by using the formula postage times 5 divided by 105.

I would call CRA and ask them about claiming for GST paid previously. There is a spot on the form for adjustments. In practical terms if you start getting money back from them you may have a visit or call from a CRA auditor ( I'm up to 5 now but they seem to have calmed down lately)

[pierrelebel]

"get the GST part by using the formula postage times 5 divided by 105. "

That was easier when we only had to deal with 5% GST.

Now with the HST (various rates) it gets more complicated.

[fatdane]

The formula becomes for BC total x 12 divided by 112
for 13$ provinces total x 13 divided by 113
old formula of total times 5 divided by 105 for the 5 % Provinces

If one could play with the Paypal history it would probably be possible to get a figure by Provinces? I'm not sure.

[pierrelebel]

Unfortunately, tax rates are more complicated than that. The rate of tax charged (GST or HST) depends on both the province where you ship from and where you ship to and the type of service you use.

From the Canada Post website:

Tax rules relating to interprovincial (consumer) Lettermail™ and (consumer) Parcel services are as follows:

subject to GST only if mailed from Manitoba, Prince Edward Island, Saskatchewan, Alberta or the Territories
subject to GST only if mailed from Ontario, British Columbia, Quebec, New Brunswick, Nova Scotia or Newfoundland and Labrador, and the total price per transaction (single or multiple items) is $5.00 or more and taken at the counter at the time of payment
if the total is less than $5.00, subject to GST and QST if mailed from Quebec, and HST if mailed from Ontario, British Columbia, New Brunswick, Nova Scotia or Newfoundland and Labrador.

Tax rules relating to interprovincial Priority™ Next A.M., Xpresspost™ and (commercial) Parcel services are as follows:

subject to HST if mailed to Ontario, British Columbia, New Brunswick, Nova Scotia or Newfoundland and Labrador regardless of total price per transaction
subject to GST only if mailed to the other provinces and territories.

[coxengines]

Pierre, Fatdane, thanks for the posts.

Manually calculating the GST/HST is possible, I know that. It is just a lot more work deleting all of the non-applicable lines in the downloaded spreadsheet and computing the taxes based on the difference.

The various HST rates are not really an issue for us as we only have 2% CAD customers of which 1/2 are lettermail shipments (HST is accounted for when buying stamps in bulk) and for the 2 parcels or so per week, we could simply print the individual statements as we generate labels.

Yes, HST is applied to shipments outside of Canada if postage is under $5. Lettermail aside, we ship 100% small and light packets outside of Canada (sub $5 pricing).

I will follow Pierre's suggestion and get some head honchos involved and keep pounding at it until it gets resolved.

Bernie