GST / HST Transition

On July 1, 2010 the Province of Ontario and British Columbia (B.C.) will join the original three provinces: Newfoundland & Labrador, Nova Scotia, and New Brunswick by switching to the harmonized sales tax (HST).

Below are the steps necessary to modify your Tax 1 and Tax 2 settings to switch from GST to the HST.

We recommend that you create new Purchase and Sales journals.

Adding a new Purchase journal

In NV2, new Journals are added in the "Journals" window of the "root" Sales and Purchase journals.

To create a new Purchase or Sales journal

1. Click on either "Purchase" or "Sales" under NewViews / Journal.
   (In the above image, the Purchase journal has been selected.)
2. In the right pane, click the window tab "Journals" and select "Settings".
3. Position the cursor on one of the existing journals and add a new line.
4. Give the new journal a name, (In the above image, "PI-HST" has been set.)
5. Give the new journal a description, (In the above image, "Purchase Invoices - HST" has been set.)
6. Give the new journal a tag, (In the above image, "financial" has been set.)
7. You may wish to give the original "PI" journal a new description
   (In the above image, "Purchase Invoices - GST" has been set.)

Settings for your new HST journals

In NV2, the HST rate is set in the "Default Tax Info" window of the "root" Sales and Purchase journals.

To access the tax settings for purchases or sales

1. Click on either "Purchase" or "Sales" under NewViews / Journal.
   (In the above image, the Purchase journal has been selected.)
2. In the right pane, click the window tab "Default Tax Info".
3. Set the new description on line 1, replace G.S.T. with H.S.T.
4. Set the rate on line 4, to the appropriate value, 13 in Ontario, 12 in B.C..
5. If you created a new GL account for the HST, press F3 on line 5 to select the new Account.
6. Set line 6 to "100", the Rebate field for Tax1, if your organization does not qualify for Rebates.
7. Delete the description on line 7, for Tax2 (PST).
   (if the description field does not clear, edit the field in the root purchase folder)
8. Set line 8 to "no", the "Vendor Charges" field for Tax2.
9. Set line 9 to "exempt", the "Item Status" field for Tax2.
10. Delete the "Rate" on line 10.
11. Delete the "Refund/Expense Account" on line 11.
12. Delete the "Rebate Percent" on line 12.
13. Set line 13 to "no", the "Is Compounded" field for Tax2.

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NV2 Purchase Settings

This is the "Default Tax Info" window of the Purchase journal. Line 4 is the rate used when calculating the HST on purchases. Simply set the rate to 13 in Ontario or 12 in British Columbia (B.C.).

There are two other places the HST rate for purchases may be set in your books: The "Default Trade/Tax Info" windows of the "root" Expense and Inventory accounts. These windows are shown below:

Rather than changing the rate from 5 to 13, you can actually delete the rates in these windows altogether. If the rate (and other tax settings) are deleted then the settings in the purchase journal are used instead. Deleting these settings makes switching tax rates much simpler - you only need to adjust the rate in one place - the Purchase Journal.

(These windows are provided for more "exotic" tax situations that are rarely encountered in the Canadian HST.)

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NV2 Sales Settings

This is the "Default Tax Info" window of the Sales journal. Line 4 is the rate used when calculating the HST on Sales. Simply set the rate to 13 in Ontario or 12 in British Columbia (B.C.).

There is one other place the HST rate for sales may be set in your books: The "Default Tax Info" windows of the "root" Sales account. This window is shown below:

As on the purchase side, you can delete the rate in this window altogether. If the rate is blank, then the rate set in the Sales journal is used. Again, as with purchases, deleting the settings in this window makes switching tax rates much simpler - you only need to adjust the rate in the Sales journal.

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Pro-rating and Transition Rates as of May 1, 2010

May 1, 2010 is the date that may affect your long term service sales. e.g. memberships, etc.

If your organization enters into a flat fee contract with a client AFTER May 1, 2010 AND if some services are performed BEFORE July 1, 2010 and some services are performed AFTER July 1, 2010, the service provider would have to allocate/prorate and account for the HST of the consideration payable in respect of the services provided AFTER July 1, 2010.

The simplest way to handle sales during the period from May 1, 2010 to June 30, 2010 for pro-rating these special transaction is to add an additional "transition" journal. Adding a new journal in NV2 is very easy - as shown above in "Adding a new Purchase journal". Contact the CRA or your accountant's office for the variable rates to use during this 60 day transition period.

Journals - Dates - Transactions

Dates / Journals	GST	Pro-rated	HST
Tax Rate	5 %	variable rate > 5%     < 13%	13% Ontario 12% B.C.
Prior to May 1, 2010	All transactions
May 1, 2010 to June 30, 2010	All 5 % transactions	All pro-rated transactions
After June 30, 2010			All transactions

Having a "Pro-rated" journal allows for simple review of transactions. This journal should only contain transaction from May 1, 2010 to June 30, 2010. The new HST journal should only have transactions after June 30, 2010 The original GST journal should have no transactions past June 30, 2010

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