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Taxing tax for vape products in British Columbia Canada Calculating GST on 20% PST

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  • Taxing tax for vape products in British Columbia Canada Calculating GST on 20% PST

    There are new tax laws in BC that increase the PST on Vape products to 20%. That is easy to do by creating a new tax code but they also want you to calculate the GST by taxing the PST.


    "Generally, when GST is payable on a good on which PST is also payable, the PST amount is not included as consideration for the purposes of calculating the GST. However, with the 20% PST rate that will apply to vapour products, the PST amount will be included in the consideration for the purposes of calculating the GST."

    As an example if the product costs $10, the current GST would be 5% so that would be 50c. The current PST at 7% would be 70c. Totaling $11.20 Both calculated on the original $10. Now the PST is 20% so that is $2.00 in PST and now the GST needs to be calculated on the original $10, plus the PST of $2, so total of $12 equaling 60c GST.

    Anyone know how do you do this?

    Thanks
    Matt

  • #2
    According to the passage you cite above, one first calculates the PST, and the GST is based on the sum of the original taxable amount plus the GST rate:






    "Generally, when GST is payable on a good on which PST is also payable, the PST amount is not included as consideration for the purposes of calculating the GST. However, with the 20% PST rate that will apply to vapour products, the PST amount will be included in the consideration for the purposes of calculating the GST. "
    Tax Taxable Amount Tax Rate Tax Due
    PST 10.00 7.0% 0.700
    GST 10.70 5.0% 0.535
    Total tax Due 1.235
    Effective tax rate 12.35%
    Notice that the taxable amount for the GDT is 7% greater that the taxable amount for the GST. It is 7% greater -- which is the amount of the PST.


    Last edited by Lorin Browning; 01-08-2020, 11:59 PM.
    Lorin Browning, Ph. D.
    Fellow -- National Tax Practice Institute

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    • #3
      I didn't realize until after the above was posted that I may not have been using the current tax rates above. Just replace the tax rates in the above post with the current ones. The logic will be the same, although the effective rate may be different, but the procedures remain the same. My apologies for any confusion I may have caused.
      Lorin Browning, Ph. D.
      Fellow -- National Tax Practice Institute

      Comment


      • #4
        Sorry I don't understand what you mean.

        I can do the basic tax value change from 7 to 20% but I do not know how to calculate the 20% PST tax on the 5% GST

        It sounds crazy but they are taxing the tax
        Last edited by Castros; 01-22-2020, 07:55 AM.

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        • #5
          The taxable amount for GST is [selling price plus (selling price times PST)]. You got it right: there is a tax on the PST tax.
          Lorin Browning, Ph. D.
          Fellow -- National Tax Practice Institute

          Comment


          • #6
            So if I get what you are saying there is a tax to be paid on the PST tax.
            How is this logical?

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