Personally I've never heard of this scenario, so hopefully your phone calls have fully vetted this setup with the CRA and BC Ministry. For example, if your client cannot charge the taxes, then how can the client indicate taxes on the invoices.

If I were buying from your client, I would want to fully see the sales taxes on the invoice so I can claim them through my business as applicable, especially the GST ITC.

Sage 50 is not setup to handle this kind of thing. It is just so much easier to pay the tax that is applicable to the vendor and charge the tax that is applicable to the end customer. I don't really see the upside of the complicated scenario as you have described it but it's late and I might not be thinking it all through.

The only way to handle what I think you need is to charge the full $11.20 as a sale and have a standard statement on the invoice that indicates the sales taxes are included. You just won't be easily able to show the amounts of sales taxes unless you calculate them and put them on manually (I believe at least the GST amount is required to be shown on an invoice for $30 or more) in the description column (I haven't looked at the rules in a long time so I might not remember them correctly right now).

This would alleviate the need for your client to use a tax code and then do a general journal entry to move the money from the liability account to revenue each month as you would have to if a tax code was used.

The only other way I can see to do it is to use two line items for the sales taxes. Use the quantity for the percentage (eg 0.05) and the unit price for the amount to charge tax on (eg. $10). Therefore there is no math to be done and the description and revenue account would automatically drop in if you used a Service item code for each tax.

Tax codes don't show up in Sales if you don't put in an account in the sales tax setup for Charged on sales. You should have received a warning to that effect when you tried to save it.

Maybe someone else has seen this kind of thing and knows a better way to handle it.

Thanks Richard. My client sells very little of this product through her store so she is just going to have a button set up on her register to charge no taxes and she'll simply enter the total cost of the item with the taxes already included (punch in 11.20). The GST & PST have already been collected by the direct seller and reported on their tax return so my client does not forward what she collects again. She charges the taxes (since she paid them) but it is bundled into revenue. It is a complicated scenario as most people who sell this product don't have their own company or are GST registered. We've had assurances from the CRA that we are doing it correctly. They are still getting their GST on the full retail value of product from the direct seller. If they expected my client to charge and remit it again that would be double dipping.

I agree, it sounds like questionable advice. Unless you were provided with a written ruling exempting the company (or if the client is a small seller which I believe is under $10,000 annual) you take a large unnecessary risk in not charging and remitting GST. 99% of our clients charge GST on items they have purchased for resale, with very rare exceptions such as dental and medical offices.