As of January 1st, 2012 the Quebec Sales Tax (QST Rate) which had gone up from 7.5% to 8.5% on January 1, 2011 will now increase to 9.5%. The effective sales tax in Quebec will go up from 13.925% to 14.975%. Since QST is calculated on the net amount + GST, the rate is not 14.5% but 14.975% . In other words the effective QST rate is 9.975%. Business owners and the self employed will need to update their invoicing and accounting systems accordingly to ensure that the rate is properly reflected.
If you are using Wave Accounting, the update to the rates is fairly straightforward, with one little quirk. Since Wave, unlike Quickbooks, does not allow for the QST to be calculated on the GST, the effective rate has to entered manually. This is done as follows:
To update Quickbooks for the tax rate increase, please see “Updating Quickbooks for the 2011 QST Increase”.
1. Sign in to your Wave Account.
2. From the toolbar, select “Settings”
3. Under Wave setup, on the left toolbar, select “Sales Taxes”
4. From here you have two choices – you can either edit the existing sales tax rate or you can add a new sales tax:
(a) Edit Existing Rate: Under name, next to the QST line, select edit. (If QST has not been set up, see “Adding Sales Tax” below.). Scroll down, enter the new rate of 9.75 (without %) and enter the effective date of January 1, 2012. Note that with this method you will only be able invoice with new rate starting January 1, 2012 (you cannot post-date invoices) and once the rate has been changed, you cannot invoice using the old date starting January 1st, 2012. This can be problematic if you are invoicing in January for products or services provided in 2011. If you expect that you will have 2011 invoicing to complete in January, 2012 or bills that have not been entered it might be more effective to use the “adding a new sales tax” described in step (b).
(b) Select Add Sales Taxes. Use Quebec Sales Tax and QST as “Tax Name” and “Abbreviation” respectively. Under tax number, you should enter the tax identification number issued to you by Revenue Quebec and tick “show tax number on invoice”. Select “yes” to “is this tax recoverable “(taxes that you pay on expenses can be recovered from the government) and finally enter the tax rate of 9.975. The advantage of using this method is that when you prepare an invoice you can select either the old QST tax rate (8.925%) or the new QST tax rate (9.975%) from the drop down menu provided for taxes. If you find, in a few months, that you are no longer using the old taxes it can be deleted
5. You can now test that the tax rate has been entered correctly by creating an invoice and ensuring that the tax amounts are correctly reflected. Note that if you use method (a) then you the new taxes will only be reflected on January 1, 2012 and after.
Should you have any questions or comments, please do not hesitate to leave a comment or contact us.