Ontario Revenues From Sales Taxes
Sales taxes make up a significant portion of Ontarios budget. Revenues from sales taxes such as the HST and RST are expected to total $28.1 billion, or 26.5% of all of Ontarios taxation revenue, during the 2019 fiscal year. This is greater than revenue from Ontarios Corporation Tax, Health Premium, andEducation Property Taxcombined.
Example Of The Sales Tax Calculation
As an example, assume that all of the items in a vending machine are subject to a sales tax of 7%. In the most recent month the vending machine receipts were $481.50. Hence, $481.50 includes the amounts received for the sales of products and the sales tax on these products. The use of algebra allows us to calculate how much of the $481.50 is the true sales amount and how much is the sales tax on those products:
Let S = the true sales of products , and let 0.07S = the sales tax on the true sales. Since the true sales + the sales tax = $481.50, we can state this as S + 0.07S = 1.07S = $481.50. We solve for S by dividing $481.50 by 1.07. The result is that the true product sales amounted to $450. The 7% of sales tax on the true sales is $31.50 . Now let’s make sure this adds up: $450 of sales of product + $31.50 of sales tax = $481.50, which was the total amount of the vending machine receipts.
Sales Use Tax Considerations
States that impose sales taxes generally impose an equivalent amount of use tax for out-of-state purchases on which no sales tax has been collected. Accordingly, purchasing goods from a neighboring state or on-line where no sales tax has been collected subjects you to use tax in your state of residence. Most states require you to self-report your out-of-state purchases and remit the calculated amount of use tax, and many states are getting extremely aggressive in pursuing this source of revenue.
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What To Tax In 2020
Once you understand the different kinds of taxes, its important to know which items fall under which bracket. Taxable goods and services include universities, tour operators and packages, telecommunication channels, facilities and services, and tribal councils, among others. The GST applies to zero-rated items including medical devices, groceries, livestock and fishery, and exports but results in a 0 percent tax charge. Last are products exempt from tax, such as most health, medical, dental, educational, and legal services, to name a few.
Small-business owners can claim input tax credits on zero-rated items, which is a way to recover GST or HST that you owe or pay on expenses or purchases related to your company.
If your company falls under any of the zero-rated or taxable industries, you will need to charge your customers either the solo GST or a HST at the time of purchase depending on what province your business resides in.
Calculating Taxable Income Using Exemptions And Deductions
Of course, calculating how much you owe in taxes is not quite that simple. For starters, federal tax rates apply only to taxable income. This is different than your total income, otherwise known as gross income. Taxable income is always lower than gross income since the U.S. allows taxpayers to deduct certain income from their gross income to determine taxable income.
To calculate taxable income, you begin by making certain adjustments from gross income to arrive at adjusted gross income . Once you have calculated adjusted gross income, you can subtract any deductions for which you qualify to arrive at taxable income.
Note that there are no longer personal exemptions at the federal level. Prior to 2018, taxpayers could claim a personal exemption, which lowered taxable income. The new tax plan signed by President Trump in late 2017 eliminated the personal exemption, though.
Deductions are somewhat more complicated. Many taxpayers claim the standard deduction, which varies depending on filing status, as shown in the table below.
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Central Board Of Direct Taxes
The Central Board of Direct Taxes is an apex body which is in charge of administration of taxes in the country. It is a statutory authority and functions under the purview of the Central Board Revenue Act of 1963. It is a division of the Ministry of Finance, working under the ambit of the Department of Revenue.
Composition of Central Board of Direct Taxes:
The Central Board of Direct Taxes is composed of the following members.
The Central Board of Direct Taxes looks after all issues and matters relating to the levy and collection of direct taxes in the country.
- It provides necessary inputs to frame policies for direct taxes
- It is in charge of the administration of direct tax laws in collaboration with the Income Tax Department.
- Processes and investigates complaints related to tax evasion.
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Sales & Use Tax In California
Retailers engaged in business in California must register with the California Department of Tax and Fee Administration and pay the state’s sales tax, which applies to all retail sales of goods and merchandise except those salesspecifically exempted by law. The use tax generally applies to the storage, use, or other consumption in Californiaof goods purchased from retailers in transactions not subject to the sales tax. Use tax may also apply to purchasesshipped to a California consumer from another state, including purchases made by mail order, telephone, or Internet.
The sales and use tax rate in a specific California location has three parts: the state tax rate, the local tax rate,and any district tax rate that may be in effect.
State sales and use taxes provide revenue to the state’s General Fund, to cities and counties through specific statefund allocations, and to other local jurisdictions.
How To Claim The Sales Tax Deduction
Use Schedule A when you file your tax return. Schedule A is where you figure your deduction. Either way, this means youll need to itemize your taxes instead of taking the standard deduction. Itll probably take more time to do your taxes if you itemize, but you could end up with a lower tax bill.
Think about using the IRSs official estimator. There are two ways to calculate your sales tax deduction:
Pull your hair out trying to find receipts for everything you bought during the year, so you can add up the sales tax, or
Just estimate what you paid by using the IRSs sales tax tables, which you can find in the instructions to Schedule A. You can also use the IRSs sales tax deduction calculator. My advice to the receipt-keepers is, if you have a normal year as far as purchases you don’t need to keep the receipts and you can just use the IRS sales tax calculator it’ll still give you a pretty handsome deduction, Riker says. Plus, the receipt-keeping method rarely bests the IRS estimation method. Usually people come out better with the general tax calculator, he says.
Sometimes you can have it both ways. You can use the IRS estimation method and then add the sales tax you paid on certain big purchases, such as a car, boat or home improvements . In those cases, it really can pay to keep those receipts they might pad your deduction, Riker says.
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How To Calculate Your Net Tax For Most Businesses
For most businesses, this calculation is straightforward. Generally, with the regular method, the GST/HST is calculated on every supply of a taxable property or service . However, to help reduce paperwork and bookkeeping costs, most small businesses can use the quick method of accounting to calculate their GST/HST net tax remittance . Under the quick method, the GST/HST paid or payable is calculated based on a percentage.
You have to calculate your net tax for each GST/HST reporting period and report this amount on your GST/HST return. To do so, calculate:
- the GST/HST collected or that became collectible by you on your taxable supplies made during the reporting period
- the GST/HST paid and payable on your business purchases and expenses for which you can claim an input tax credit
The difference between these two amounts, including any adjustments, is your net tax. For help calculating the net tax and filling out your GST/HST return using the regular method, see:
During your last reporting period, you collected $1,000 of GST/HST from your clients. You are also eligible to claim ITCs of $800 for the GST/HST you paid on business expenses. If you have no adjustments to include on your return for the reporting period, your net tax would be $200.
For more information on claiming ITC’s, see Input tax credits.
Certain supplies are not eligible for the quick method calculation.
Input tax credits
Do You Need To Register To Collect Sales Tax
If you sell, lease, distribute, or rent tangible personal property to customers in Virginia, or otherwise meet the definition of a dealer, and have sufficient activity in Virginia, you have nexus as defined in Va. Code § 58.1-612, and must register to collect and pay sales tax in Virginia.
- In-state dealers: generally individuals and businesses making sales with, or at, one or more physical locations in Virginia must register to collect sales tax as an in-state dealer.
- Out-of-state dealers: generally individuals and businesses located outside of Virginia, but with sufficient physical or economic presence to establish nexus in Virginia, must register to collect sales tax as an out-of-state dealer. Starting July 1, 2019, this includes remote sellers or online retailers that make more than $100,000 in annual Virginia gross sales or 200 or more transactions to Virginia customers. Learn more about economic nexus requirements for remote sellers.
- that have economic nexus in Virginia must register to collect and pay sales tax starting July 1, 2019. Generally, businesses without a physical location in Virginia that meet the economic nexus threshold should register as an out-of-state dealer, and businesses with a physical location should register as an in-state dealer. Marketplace facilitators must indicate that they are a marketplace facilitator when registering. Learn more.
How to register
You can register online or by mail. Use our checklist to make sure you have what you need.
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How To Decide Which Deduction To Take
First, decide whether to take the standard deduction or whether to itemize deductions. If you choose to take the standard deduction, then you cant itemize deductions, including the sales tax deduction.
For the tax year 2020, the standard deduction amounts are generous:
- $12,400 for individuals and married couples filing separately.
- $24,800 for married couples filing jointly.
- $18,650 for heads of households.
If you tally up your itemized deductions and they dont exceed the standard deduction amount, youre better off not itemizing at all. Expenses that can be itemized include charitable contributions, personal casualty and theft losses from a federally declared disaster, mortgage interest, and medical and dental expenses that exceed certain thresholds.
If itemizing proves to be the better course of action, taxpayers then must choose between taking the state and local income tax deduction or the sales tax deduction. People typically pay more in state income taxes than state and local sales taxes, but it pays to total both types of expenses and compare them to make sure. For those who live in states with no income tax, its a no-brainer to take the sales tax deduction. Residents in states with no sales tax likely would fare better by taking the income tax deduction.
Are Businesses Required To Charge Sales Tax
Businesses are responsible for charging, reporting, and paying sales tax on goods and services sold within the state where the business has a physical presence. Because sales tax rates and regulations are set at a state level, its important to know your states specific general use and sales tax rates.
In many states, businesses must have a permit to collect sales tax. The Small Business Administration offers a breakdown of sales tax permit requirements by state. You can also check with your states department of revenue to evaluate your taxation obligations.
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Faqs For Sales Tax Licenses
Is there a fee for a sales tax license?
No, there is not a fee for a sales tax license.
Who needs a sales tax license?
Individuals or businesses that sell tangible personal property to the final consumer.
May I start selling products if I have submitted my Registration Application but have not received my sales tax license?
You are not required to wait for your sales tax license to arrive to begin selling items at retail. However, as soon as you begin selling items at retail, you are required to remit sales tax to the State of Michigan.
Once your application is processed, your sales tax license is available on MTO immediately with registration access.
When should I pay my sales tax with a Concessionaires Form and when should I register for sales tax with a Registration Form ?
If you make retail sales at only one or two events in Michigan per year, you may complete Form 5089, Concessionaire’s Sales Tax Return and Payment, or, if you prefer, you may apply for a sales tax license.
If you make retail sales at more than two events in Michigan per year, you must have a sales tax license.
I am a wholesaler. Do I need a sales tax license?
No, Michigan does not issue sale tax licenses to wholesalers. In order to claim an exemption, a wholesaler must provide the seller with a completed Form 3372, Michigan Sales and Use Tax Certificate of Exemption, and indicate that the purchase is for “Resale at Wholesale”.
How do I obtain a sales tax license?
Retail Sales Tax Refunds
You can get a refund of RST that has been:
- incorrectly charged on insurance premiums or benefit plans
- paid in error when transferring a vehicle at a ServiceOntario centre.
Complete and send a refund application form to the Ministry of Finance within four years from the date the RST was paid. With your completed application, include all supporting documents and proof that RST was paid.
- Retail Sales Tax Act, and
- Tobacco Tax Act.
The Clearance Certificate indicates that all taxes, penalties and interest collectable or payable by you, the seller, have been paid or that satisfactory arrangements have been made for such payment or for securing such payment.
A purchaser that fails to obtain a copy of the Clearance Certificate from the seller could be liable for any taxes, penalties and interest owing by the seller at the time of the sale.
The requirements apply to sellers who held or who were required to hold a permit under the Retail Sales Tax Act on or before June 30, 2010, as well as to sellers who, at any time after June 30, 2010, hold or are required to hold a permit under the Retail Sales Tax Act.
All requests for Clearance Certificates must be made in writing, at least two weeks before the sale takes place, and signed by the seller or the seller’s authorized representative.
The request should be sent by fax to 905 4364474 or by mail to:
Ministry of Finance 33 King Street West PO Box 627 Oshawa ON L1H 8H5
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Line 7 Payment Amount
This is the amount you are paying. This should be equal to the amount from Line 6 plus or minus the account balance shown on your return. If you have an amount owing, it is added to the Line 6 amount while a credit balance is subtracted.
NOTE: The account balance shown is effective the date your return was printed. If you have made payment toward your balance owing or used a portion/all of your credit in a previous return, you should adjust the amount accordingly.
You must file your return on time, even if you did not make any sales or charge/collect any RST during the return period .
You may file your return and make payment in one of the following ways:
- Electronically, using a financial institution’s Internet banking services to send your return, including a nil return. For more information, visit our website at ontario.ca/taxservices.
- In person at your Ontario financial institution free of charge. The payment must be teller stamped on or before the due date. Financial institutions will not accept returns without a payment. If you have a nil return, then you must send it directly to the address at the top of your return, take it to a Ministry of Finance Tax Office or file it electronically.
Make your cheque or money order in Canadian funds payable to the Minister of Finance.
The information contained in this publication is only a guideline. For more information, please contact the Ontario Ministry of Finance at 1 866 ONT-TAXS or visit our website at ontario.ca/finance.