How do I get the non-deductible portion of HST to show under the expense instead of under Receiver General non-deductible?

Hey janz,

It sounds like you've already set up your Meals and Entertainment taxes correctly, so you're already on the right track! Having a separate account for the non-deductible portion gives you a clearer picture of exactly where your money is being spent, but many businesses prefer to include this in their regular meals expense account. In order to give you maximum control over your own books, the default tax expense account can be renamed at any time. Alternatively, the expense portion can be set up or the expense portion can be absorbed into the regular expense account. I'll be happy to help you with this. 

You seem to have a solid understanding of setting up this tax code, but here's an awesome guide if you'd like a refresher: How to set up a sales tax rate for Meals and Entertainment

The easiest to make this change is to simply edit the name of the existing tax expense account. It's just a few simple steps, and it will apply retroactively:

1. Select Accounting from the left menu.
2. Locate the Receiver General non-deductible account you'd like to edit.
3. Select the drop down arrow next to Account history or Run report (depending on the account).
4. Select Edit.
5. Make all desired changes and click Save and Close. 

This won't change how the expense portion is recorded or tracked, but it will appear with the desired name on your reports. 

If you'd prefer to have the whole expense in a single account (based on the expense), that can also be done. You'll just need to create a new tax rate and group. One thing to note before proceeding with this method is it won't affect existing transactions. Since most of the work is already done, it's just a few more quick steps:

1. Head to your Taxes tab and select Manage sales tax.
2. Click Add rate, enter a Name (such as HST Meals Expense), then select the I pay this on purchases box.
3. Enter the non-deductible Tax on purchases rate.
4. Select Non-tracking from the Account drop-down, then click Add.
5. Next to the newly created tax rate, select Make inactive.

By selecting Non-tracking, you're telling QuickBooks to include this rate in calculations without tracking it in a separate account. Instead, the non-deductible portion will remain in the meals expense you selected on your transaction. All that's left to do is to add it to a group rate:

1. From the Manage sales tax screen, select Add tax.
2. Locate the Group rate section and select Add.
3. Enter a unique Group name for your new M&E tax code.
4. Select the HST code we created in the above steps from the first Tax rate drop-down. Net amount will be the default selection in the Applicable on drop-down.
5. Select your existing HST liability rate for meal from the second Tax rate drop-down. Select Net amount from the Applicable on drop-down.
6. You should have two tax rates in total (unless your provincial sales tax is tracked separately from GST).
7. Select Add.

Feel free to make the old group inactive, as well as all the individual rates. Only the new group needs to be active to select it on your expenses. For real-time support, feel free to reach out using one of the methods below. 

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I'm here for you, so let me know if you have any more questions!