Simple Formula to Calculate GST on Sales in Alberta | QuickBooks Canada Tips & Tricks

If you are a small business who and made more than $30,000 gross revenue in the past, you need to be filing GST remittances. In Alberta, there is no provincial sales tax and no harmonized sales tax. This means sales tax is currently 5% only.

Calculating GST can be a little tricky, and there are some GST formulas every bookkeeper in Alberta should know in the back of their mind.

In this post, I will show you a simple math formula for calculating GST on a sales amount or removing GST from an amount.

Let’s get into it. 

 

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1      Formula to Calculate Sales Price + GST in Alberta

In this example, say you buy a new guitar in Alberta for your music business. The price of the guitar is $100.00 + GST

Total Price = (100 x 1.05)

= 105

Easy! We’ve found the total price including GST. 

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2      Formula to Back Out GST in Alberta

Now, let’s say you are entering the receipt on your bookkeeping software for the guitar and you need to back out GST. Here’s the formula to do that. You know from your receipt that the total price was $105, but you want to back out the GST and find out how much was for the item. 

 

Sales Price = Total Price/1.05

= 105/1.05

= 100

Another easy formula for finding the GST on sales in Alberta!

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3.       Formula for calculating GST from total sales in Alberta

To find out how much GST was paid on an item, we could do it two different ways.

a.       You could use the above formula and subtract the sales price, this is the long way of calculating GST

 

GST = Total Price – Sales Price

= Total Price – (105/1.05)

= 105 – (105/1.05)

= 105 – 100

= 5

 

 

b.       A quicker method of doing this is simply

GST = Total Price/21

= 105/21

=5

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How does This GST formula work?

Because GST is 5%, you are paying 1 dollar in GST for every 20 dollars of goods or services.

Therefore, if you divide by 21, you get 5% of the total value.

If you do your own bookkeeping for a small business in Alberta, Canada, this can be a great formula to know. Saving even a few seconds per transaction by knowing that the total amount divided by 21 will give you the GST can really add up if you entering thousands of transactions into the general ledger.

As QuickBooks Accountants in Alberta, this GST calculation formula especially comes in handy when making general journal entries in QuickBooks when posting to the GST/HST payable account.

 

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        Formula to Calculate Total Meal Price + GST in Alberta

In     In Canada, meals are 50% deductible, meaning only 50% of the GST can be counted as an ITC (input tax credit) against GST on income. The formula is similar to calculate GST on meals in Alberta, but we use half the amount of GST, so 1.025

 

Total Meal Price = (100 x 1.025)

= 102.50

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       Formula to Back Out GST on Meals in Alberta

A    Again, backing out GST on meals uses half the GST amount, so 1.025. 

 

Meal Price = Total Price/1.025

= 102.50/1.025

= 100

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           Formula for calculating GST from Total Meal Price in Alberta

To find out how much GST counts as ITCs in Alberta, we could again use one of two formulas.

a.       You could use the formula and subtract the meal price, this is the long way of calculating GST

 

GST = Total Meal Price – Meal Price

= Total Meal Price – (102.50/1.025)

= 102.50 – (102.50/1.025)

= 102.50 – 100

= 2.50

 

 

b.       The method I prefer is:

GST = Total Meal Price/41

= 102.50/41

=2.50

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How does This GST on Meals formula work?

Because now GST on meals is 52.5% because half of the GST paid for the meal is deductible,  you are paying 1 dollar in (Deductible!) GST for every 40 dollars of meals.

Therefore, if you divide by 41, you get 2.5% of the total value. 

When entering the financial data on the T2, you will need to enter 100% of the meal expense. The software will then claim 50% of that. This is why you still enter 100% of the meal expenses on QuickBooks and the T2, but only 50% of the GST.

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