Overview of Sales Tax
Sales tax is a tax on the consumption of goods and services charged by both federal and provincial levels of government. The federal tax is the Goods and Services Tax (currently 5%) hereafter called GST. To harmonize the provincial and federal sales tax system, Quebec introduced the Quebec Sales Tax (QST) currently 9.975% that is applied on the purchase price only.
Five provinces have adopted a single value-added Harmonized Sales Tax (HST) which contains both a federal and provincial portion. The HST is calculated in lieu of GST when goods or services are consumed by purchasers in the participating provinces. Effective October 1, 2016, the participating provinces and the corresponding rates are as follows:
General Tax Rates & McGill's Registration #
|Tax||Description||Tax rate||Basic rebate||Formula Rate to be entered for online invoicing||McGill's Registration #|
|GST||Good & Services Tax (federal)||5%||67%||0.05||11912 8981 RT0001|
|QST||Quebec Sales Tax (provincial)||9.975% (on the purchase price only)||47%||0.09975||1006385920 TQ0002|
Harmonized Sales Tax
Newfoundland & Labrador
Prince Edward Island
(in lieu of GST)
67% of the federal portion of HST
|Same as GST number|
Sales Tax and Expenditures
All sales, rentals and other supplies of goods, services and property by the University must be examined to determine the applicability of each tax. The rules that significantly impact University activities are outlined below.
The following activities are not subject to GST/HST and QST:
- Donations of money to McGill;
- Donation “in kind”, where it is not a part of a barter transaction;
- Services rendered by an employee to an employer;
- Fines and penalties;
- Self-Supply (i.e. all inter-departmental charges within McGill);
- Grants that have no strings attached (e.g. no reporting requirements other than financial reporting, or services rendered to the granting agency).
Taxes paid on all University expenses are generally recoverable in whole or in part. For purchases that support exempt activities (e.g., teaching), the University is entitled to 67% rebate of GST as well as HST (of the federal portion) paid and 47% of QST paid. For purchases that support taxable or zero-rated activities, a 100% Input Tax Credit is available for each tax. For departments that have a predictable mixture of exempt, taxable and/or zero-rated supplies, a blended rate can be established to yield a higher rebate on taxes paid for purchases. Blended return rates are set on a fund by fund basis.
Purchase requisitions allow for identification of tax status of the goods or services being purchased, typically determined by vendor but is overrideable if required. The reservation amount includes the full tax amount. The subsequent Purchase Order will also encumber the full tax amount.
Invoices processed via Accounts Payable
All goods purchased and services paid for are taxable, regardless of whether or not GST and QST appears on an invoice:
- As long as a good or service is to be used/consumed in Canada, GST must be charged and remitted to the Government.
- If an invoice includes an amount for GST, it is paid to the Supplier.
- If an invoice from a Canadian company shows no GST, Accounts Payable will determine if self-assessment is required.
- If an invoice from a non-Canadian company shows no GST, and the item is tangible, (equipment) and coming through customs, it is charged to the fund through our broker, Thompson Ahern International. Accounts Payable will assess GST on non-tangible items that do not clear customs. Ex: maintenance contracts, license agreements.
- In addition to GST, as long as a good or service is to be used/consumed in Quebec, QST must be charged and remitted to the Government.
- If an invoice includes an amount for QST, it is paid to the Supplier.
- If an invoice from a Quebec company shows no QST, Accounts Payable will determine if self-assessment is required.
- If an invoice from a non-Quebec company shows no QST, then Accounts Payable assesses the QST at the current rate and the University remits the tax to the Government. (some exceptions apply)
Travel and Other Personal Reimbursements
Taxes paid on travel and other personal reimbursements must be segregated by the claimant in order for the rebate and/or tax credit to be claimed. Detailed instructions with respect to sales taxes can be found in the Procedures for Travel and Other Reimbursable Expenses on the Financial Services website.
Frequently Asked Questions
|Why does the total cost of an order I placed in the McGill MarketPlace (MMP) not match the total cost displayed when I am asked to approve the same order?||Once an order has been placed in MMP, the system calculates the GST and QST and a reservation is created on the fund or grant which includes the full tax amount. It is only after taxes have been assessed that an order is sent for approval and that is why the document total will always be higher than the amount shown in MMP.|
|What about rebates? I have been told that we don’t pay taxes | When I am looking at the transactions on my fund or grant, I see line items for Goods and Services Tax – Federal & Quebec Sales Tax – Provincial and it displays REBT next to the amount.||
The University is entitled to 67% rebate of GST as well as HST (of the federal portion) paid and 47% of QST paid. (some exceptions apply).
To calculate how much taxes your fund will be charged after rebates, use the tax rate of 6.937%.
|If the University is entitled to rebates and some goods/services are tax exempt, why is GST and QST encumbered on my fund or grant for every payment to be processed?||Unfortunately the system is not set-up to determine for which payments taxes are to be applied, and rebates are only assessed once the payment has been made. Therefore, to ensure that a fund or grant has adequate money available to pay for taxes, taxes are always calculated and encumbered. Once invoices have been processed, tax rebates will be credited to the fund(s) the following day.|
|When are tax rebates processed? How soon after an invoice has been paid is my fund credited the rebates?||Tax rebates are posted to funds nightly - any invoice processed for payment during the day, which is eligible for tax rebates, will show the tax rebates credited back to the fund the next day.|
|An invoice (to be paid) only shows GST. The encumbrance on my fund or grant does not match the invoice total – the encumbrance is for a higher amount. Are we going to over-pay the Supplier?||No, we will not over-pay the Supplier - they will only be paid for the amount of the invoice. As long as a good or service is to be used/consumed in Quebec, QST must be assessed and remitted to the Government. This is why the encumbrance on your fund or grant is higher than the invoice total.|
|An invoice (to be paid) shows HST. Why are we paying the Supplier less than the invoice total?||HST is a single value-added Harmonized Sales Tax (HST) which contains both a federal and provincial portion for taxes. McGill University is only liable to pay the supplier GST and QST is self-assessed (as determined by Accounts Payable).|
|I agreed to pay a consultant $3000 and budgeted exactly $3000 for this expenditure on my fund or grant. What will happen when payment is processed and the invoice shows no taxes?||The system will calculate the GST and QST and there will need to be adequate money available in the fund or grant to be charged to absorb the $3000 cost plus taxes. Once payment of the invoice is processed ($3000 to the consultant), the tax rebates will be assessed and credited to the fund or grant and the appropriate amount of taxes remitted to the government.|
For support on sales tax, email infotax.acct [at] mcgill.ca (Info Tax).