Canada Handling tax payable when not collecting sales tax (selling to the U.S) but buying taxed equipment in Canada

May 11, 2022
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I have been handling the accounting of my small business for a couple of years now without much problem but now an issue arise.

Our clients are in the US, therefore we don't collect sales tax in canada.

However we regularly buy taxed goods, services and equipment in Canada, which goes into a liability account (Taxe Payables).

Since we don't collect taxes this account is only fed with our tax expenses, turning it into a negative payable account. (We don't receive payments from the government because we have not collected taxes.)

Because this turns into a negative payable -> receivables into our Quickbooks system, this affects our balance and income taxe.
Therefore our generated reports show that $16000 is expected to be received and influence our income due tax when it should not...unless at some point we collect tax in Canada.


- We may one day have Canadian clients and collect taxes making this accounting logic valid. But this translate into a liability from the gouvernement to us which is not true at this point in time, and makes it look that we have more money that we actually have. We will always have more clients in the some point maybe the accounting should be done in USD with US bank account, but for now our bank account is in CAD and so is our accounting.

Im looking for solution to balance/delay this money that we won't receive anytime soon.

I hope my explanation is clear and understandable.

I appreciate any insights.

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