Both the 25% and the 75% are just deposits - they are not invoices so both goes to the 2460 account.

When the person completes their stay then an invoice is prepared and that is when the GST comes into account.

See below for explanation regarding deposits: The person you were talking to may have misunderstood what the deposit were for.

www.cra-arc.gc.ca/.../g300-6-8-e.html

Thanks for the article. That's what I initially assumed but it seems odd to me that guests who don't accrue any extra charges during their stay will be billed for just the tax on departure.

This is what I've received in my correspondence with the Ministry of Finance regarding PST:

      <<<<The time in which the PST becomes due may be different than when the deposit becomes “income” for income tax purposes.

Based on our understanding, the full payment for the accommodation becomes due 60 days before the guest arrives. At this time, a “sale” of accommodation has been made and you should charge the PST on the full cost of the accommodation. You are required to remit that PST on the PST return for that period; you should not wait until the money is actually reported as income.>>>>

When I make an online reservation at a hotel for a few months down the road,  I pay upfront including all the taxes  - I'm not sure how would that be a different circumstance?

see this link to PST in BC -

www.sbr.gov.bc.ca/.../pst_120.pdf

Note page 4 - Charging PST and MRDT - that states deposits are not taxable until you apply the deposit towards the purchase price of accommodation. You may be confusing 'full payment' with 'deposit'.

I would suggest giving another call to PST office to further clarify since the deposits is to 'reserve' the room.

If the guest doesn't show up, are you going to keep the entire deposit or just a portion of it? Usually, just a portion of it. Hence the prepayment is only a deposit. Plus the actual service isn't performed until the accommodation is provided - when the guest arrives/leaves. I agree with Smithco.

The initial 25% is non-refundable and the final 75% is essentially non-refundable except in the case that someone else is able to take that spot or it can be carried over within the same season.  This is fairly standard practice in our type of specialty lodging because our short season makes it hard to fill last minute cancellations (or any cancellations for that matter).  

In most instances we will be keeping the entire 100%.

So maybe it's the terminology that is confusing and we *are* applying the deposit to full payment at 60 days before arrival.

Well, it's worth another phone call just to try because this is really screwy but based on what you typed above, it seems like the province understands that the income has not been earned, they just want their cut sooner.

25% deposit - create receipt

75% deposit - create receipt

60 days before accommodation -- create invoice for just the PST portion

at time of stay -- create invoice for sale plus GST.

However, that wouldn't tie the PST to the sale amount easily (in case of an audit).

You could, at 60 days, add another 2 lines on the invoice to a clearing account "PST Sales clearing"; post both a positive and negative amount to that account on the invoice, so the net amount of the invoice is still only the PST portion and the customer account shows a prepayment for the same amount of the sale plus GST. the PST Sales Clearing account would also have a balance of zero. At least that way you can come up with what sale amount the PST is referenced to.

If you give credits that can get confusing though, in which case the answer would be to have a PST Sales Clearing and a PST Sales Clearing Contra account. The net between the two accounts would be zero, but the PST Sales Clearing account would have the total value of the sale before GST that the PST is calculated on.

Is that too confusing to follow? I know what I mean in my head; I can try to explain another way or use screen shots to show it.

What does your accountant say about this?

Thanks Amy - I know, it doesn't seem quite right. My accountant has been on holidays (of course) so I haven't had a chance to talk it out with him but plan on it as soon as he's in.  I'm tempted to call another establishment who has a similar pay schedule and get the name of their bookkeeper!

Until then, I will mull over your answer - I'm not quite sure I get it at the moment but I'll give it some thought!

Thanks Amy - I know, it doesn't seem quite right. My accountant has been on holidays (of course) so I haven't had a chance to talk it out with him but plan on it as soon as he's in.  I'm tempted to call another establishment who has a similar pay schedule and get the name of their bookkeeper!

Until then, I will mull over your answer - I'm not quite sure I get it at the moment but I'll give it some thought!

so I book a lodge for 1000.00 on Dec 25
the breakdown is
  rental 892.86 (1000 / 1.12)
  gst     44.64 (892.86 * .05 = 44.643)
  pst     62.50 (892.86 * .07 = 62.50)

and today you collect 250.00 from me, and record as a receipt/customer deposit
and on Oct 25th you collect/record a second receipt in Sage for 750.00
and on Dec 25th, you hand me a final invoice


you could
  create a liability account 2462 Prepaid Lodging Deposit  (can't use a linked account like 2460)

  create a non refundable PST only tax code (included in price) - 

   to calculate the PST on an amount consisting of revenue & GST
   I called my code Pn - the rate is 62.50 / (892.86 + 44.64) = 6.6667%
     PST  Taxable  6.6667  yes no

  create a refundable GST/PST tax code (included in price) - mine is called Pi  (you may already have this)
     GST  Taxable  5.0000  yes yes
     PST  Taxable  7.0000  yes no

  create a sales invoice, net 0.00 - this would be done for both deposits
     line 1
       amount = 250
       tax code = Pn
       account = 2462
     line 2
       amount = -250
       tax code = blank
       account = 1060 (or cash to be deposited)


    which will create
                             Account Number  Account Description        Debits          Credits                                                
Sep 9, 2014      J258                                                                                                                                                                                                                                             
                              1060            Chequing Bank Account       250.00               -
                              2340            PST Charged on Sales             -           15.63
                              2462            Prepaid Lodging Deposit          -          234.37

Oct 25, 2014      J259                                                                                                                                                                                                                                             
                              1060            Chequing Bank Account        750.00               -
                              2340            PST Charged on Sales              -           46.88
                              2462            Prepaid Lodging Deposit           -          703.12


  when the customer arrives, create a customer sales invoice, net 0.00
     line 1
       amount = 1000
       tax code = Pi
       account = 4100 (revenue)
     line 2
       amount = -1000
       tax code = Pn
       account = 2462

    which will create
                              Account Number  Account Description        Debits           Credits                                                
Dec 25, 2014      J260                                                                                                                                                                                                                                            
                              2462            Prepaid Lodging Deposit       937.50               -
                              2310            GST/HST Charged on Sales           -           44.64
                              4100            Lodging Revenue                    -          892.86

you'll noticed that due to rounding the prepaid account has a .01 balance 
   - at monthend you can create a general journal entry to post this to a miscellaneous income account

you should also know that you can store sales order as recurring transaction
  then you can recall them, change the customer, date and amount, and post
  I stored one as 'customer deposit invoice' and one as 'customer sales invoice'
                                                                             

Deposits are not taxable until you apply the deposit towards the purchase price of accommodation - meaning when the guests arrives then you create an invoice which is the 'purchase price of accommodation'. Then you would 'apply' the deposit towards the 'purchase price of accommodation' invoice.

If the guest does not show up and forfeit the deposit then it still gets recorded as revenue but is not PST taxable since there was no 'purchase of accommodation' - in other word the guest did not use a room.

So then do I call both payments "deposits" - still include a  tax amount  in the final "deposit"  - and then create an invoice as  I normally would when they arrival. Is that all your suggesting smithco? That I continue treating the final payment as a deposit (even though it includes tax)?

Smithco - the Minister of Finance told TCF:

<<<<The time in which the PST becomes due may be different than when the deposit becomes “income” for income tax purposes.

Based on our understanding, the full payment for the accommodation becomes due 60 days before the guest arrives. At this time, a “sale” of accommodation has been made and you should charge the PST on the full cost of the accommodation. You are required to remit that PST on the PST return for that period; you should not wait until the money is actually reported as income.>>>>

They are telling him that for their purposes the sale has been made 60 days before the service has been performed. I agree it sounds really, really odd, but if he has written instruction from them to do this, I don't see as he has any choice but to record the PST as payable at 60 days before accomodation, unless he receives a ruling on it stating otherwise.

The deposit should be not including taxes since if guests forfeit reservation which is not same as purchase then there is no PST charged (in BC anyway). When guests arrives and stay at accommodation then full payment to be made for taxes and any other revenue incurred at the time. That may be your downfall there as you are including taxes in the deposit - I would suggest to not include taxes in deposits which would then mean full payment has not been received.

Sometimes the PST or HST/GST personnel one may be talking to do not fully understand the situation or give misleading/incorrect information due to inexperience. I would suggest to call again - I have had to call twice cus others were told differently. If owner owns less than 4 units then there is no PST.

I don't mean to be argumentative - just confused :), I don't see how our situation differs from pre-booking a hotel online. When I book and pay for my hotel room in advance I pay for the whole thing and tax is included on my invoice and in my total even though I won't be staying in the room for a number of months.  

Can you explain how this would be a different situation? Or what they do differently (besides obviously taking a smaller deposit first) to allow them to charge me tax before I have fulfilled my booking?

You are not being argumentative - you are just asking questions to understand better. However I don't know how hotels work - I do know there are different rulings for different types of accommodation which I am not familiar with all of them. I am involved with a resort hence why I offer what I know about this type of accommodation. It may be that becus you ask for full payment including taxes then you are required to pay PST at that time but the issue remains about forfeiture where PST is not applicable - in that case do you return the PST portion back to the customer? If so then it will be as a credit on the next PST remittance.

Hi all - I thought I should post the solution that my accountant proposed.  As we are a smaller company, we are recording the income as revenue at the time that the final payment (including tax) is processed. This way I can accurately report the PST when the gov would like me to.  With a strict cancellation policy we have a very low cancellation rate and I can return the PST back to the customer and credit my remittance if necessary.  Thanks for the dialogue :)